Correlation Between Commonwealth Bank and Champion Iron
Can any of the company-specific risk be diversified away by investing in both Commonwealth Bank and Champion Iron 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 Champion Iron into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Commonwealth Bank and Champion Iron, you can compare the effects of market volatilities on Commonwealth Bank and Champion Iron 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 Champion Iron. Check out your portfolio center. Please also check ongoing floating volatility patterns of Commonwealth Bank and Champion Iron.
Diversification Opportunities for Commonwealth Bank and Champion Iron
-0.64 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Commonwealth and Champion is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Commonwealth Bank and Champion Iron in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Champion Iron 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 Champion Iron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Champion Iron has no effect on the direction of Commonwealth Bank i.e., Commonwealth Bank and Champion Iron go up and down completely randomly.
Pair Corralation between Commonwealth Bank and Champion Iron
Assuming the 90 days trading horizon Commonwealth Bank is expected to generate 2.18 times less return on investment than Champion Iron. But when comparing it to its historical volatility, Commonwealth Bank is 1.28 times less risky than Champion Iron. It trades about 0.18 of its potential returns per unit of risk. Champion Iron is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest 564.00 in Champion Iron on September 12, 2024 and sell it today you would earn a total of 67.00 from holding Champion Iron or generate 11.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Commonwealth Bank vs. Champion Iron
Performance |
| Timeline |
| Commonwealth Bank |
| Champion Iron |
Commonwealth Bank and Champion Iron Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Commonwealth Bank and Champion Iron
The main advantage of trading using opposite Commonwealth Bank and Champion Iron positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Commonwealth Bank position performs unexpectedly, Champion Iron 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 Champion Iron will offset losses from the drop in Champion Iron's long position.| Commonwealth Bank vs. Aristocrat Leisure | Commonwealth Bank vs. Hawsons Iron | Commonwealth Bank vs. Red Hill Iron | Commonwealth Bank vs. Legacy Iron Ore |
| Champion Iron vs. Apiam Animal Health | Champion Iron vs. Group 6 Metals | Champion Iron vs. Black Rock Mining | Champion Iron vs. Sonic Healthcare |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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