Correlation Between Commonwealth Bank and Dexus Convenience
Can any of the company-specific risk be diversified away by investing in both Commonwealth Bank and Dexus Convenience 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 Dexus Convenience into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Commonwealth Bank and Dexus Convenience Retail, you can compare the effects of market volatilities on Commonwealth Bank and Dexus Convenience 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 Dexus Convenience. Check out your portfolio center. Please also check ongoing floating volatility patterns of Commonwealth Bank and Dexus Convenience.
Diversification Opportunities for Commonwealth Bank and Dexus Convenience
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Commonwealth and Dexus is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Commonwealth Bank and Dexus Convenience Retail in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dexus Convenience Retail 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 Dexus Convenience. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dexus Convenience Retail has no effect on the direction of Commonwealth Bank i.e., Commonwealth Bank and Dexus Convenience go up and down completely randomly.
Pair Corralation between Commonwealth Bank and Dexus Convenience
Assuming the 90 days trading horizon Commonwealth Bank is expected to generate 0.79 times more return on investment than Dexus Convenience. However, Commonwealth Bank is 1.26 times less risky than Dexus Convenience. It trades about 0.1 of its potential returns per unit of risk. Dexus Convenience Retail is currently generating about 0.04 per unit of risk. If you would invest 9,139 in Commonwealth Bank on November 27, 2024 and sell it today you would earn a total of 6,484 from holding Commonwealth Bank or generate 70.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Commonwealth Bank vs. Dexus Convenience Retail
Performance |
| Timeline |
| Commonwealth Bank |
| Dexus Convenience Retail |
Commonwealth Bank and Dexus Convenience Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Commonwealth Bank and Dexus Convenience
The main advantage of trading using opposite Commonwealth Bank and Dexus Convenience positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Commonwealth Bank position performs unexpectedly, Dexus Convenience 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 Dexus Convenience will offset losses from the drop in Dexus Convenience's long position.| Commonwealth Bank vs. Stelar Metals | Commonwealth Bank vs. Sky Metals | Commonwealth Bank vs. Retail Food Group | Commonwealth Bank vs. Lendlease Group |
| Dexus Convenience vs. Steamships Trading | Dexus Convenience vs. Diversified United Investment | Dexus Convenience vs. Southern Cross Media | Dexus Convenience vs. Nine Entertainment Co |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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