Correlation Between Commonwealth Bank and BHP Group
Can any of the company-specific risk be diversified away by investing in both Commonwealth Bank and BHP Group at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Commonwealth Bank and BHP Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Commonwealth Bank and BHP Group Limited, you can compare the effects of market volatilities on Commonwealth Bank and BHP Group and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Commonwealth Bank with a short position of BHP Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Commonwealth Bank and BHP Group.
Diversification Opportunities for Commonwealth Bank and BHP Group
-0.42 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Commonwealth and BHP is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Commonwealth Bank and BHP Group Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BHP Group Limited and Commonwealth Bank is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Commonwealth Bank are associated (or correlated) with BHP Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BHP Group Limited has no effect on the direction of Commonwealth Bank i.e., Commonwealth Bank and BHP Group go up and down completely randomly.
Pair Corralation between Commonwealth Bank and BHP Group
Assuming the 90 days trading horizon Commonwealth Bank is expected to generate 0.86 times more return on investment than BHP Group. However, Commonwealth Bank is 1.16 times less risky than BHP Group. It trades about 0.16 of its potential returns per unit of risk. BHP Group Limited is currently generating about -0.01 per unit of risk. If you would invest 11,433 in Commonwealth Bank on August 27, 2024 and sell it today you would earn a total of 4,470 from holding Commonwealth Bank or generate 39.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Commonwealth Bank vs. BHP Group Limited
Performance |
| Timeline |
| Commonwealth Bank |
| BHP Group Limited |
Commonwealth Bank and BHP Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Commonwealth Bank and BHP Group
The main advantage of trading using opposite Commonwealth Bank and BHP Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Commonwealth Bank position performs unexpectedly, BHP Group can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in BHP Group will offset losses from the drop in BHP Group's long position.| Commonwealth Bank vs. BKI Investment | Commonwealth Bank vs. Centaurus Metals | Commonwealth Bank vs. Hotel Property Investments | Commonwealth Bank vs. Ainsworth Game Technology |
| BHP Group vs. IDP Education | BHP Group vs. EMvision Medical Devices | BHP Group vs. Readytech Holdings | BHP Group vs. Zoom2u Technologies |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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