Correlation Between Commonwealth Bank and FSA
Can any of the company-specific risk be diversified away by investing in both Commonwealth Bank and FSA 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 FSA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Commonwealth Bank and FSA Group, you can compare the effects of market volatilities on Commonwealth Bank and FSA 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 FSA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Commonwealth Bank and FSA.
Diversification Opportunities for Commonwealth Bank and FSA
-0.69 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Commonwealth and FSA is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Commonwealth Bank and FSA Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FSA Group 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 FSA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FSA Group has no effect on the direction of Commonwealth Bank i.e., Commonwealth Bank and FSA go up and down completely randomly.
Pair Corralation between Commonwealth Bank and FSA
Assuming the 90 days trading horizon Commonwealth Bank is expected to generate 0.76 times more return on investment than FSA. However, Commonwealth Bank is 1.32 times less risky than FSA. It trades about 0.1 of its potential returns per unit of risk. FSA Group is currently generating about -0.01 per unit of risk. If you would invest 9,740 in Commonwealth Bank on September 12, 2024 and sell it today you would earn a total of 6,023 from holding Commonwealth Bank or generate 61.84% 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. FSA Group
Performance |
| Timeline |
| Commonwealth Bank |
| FSA Group |
Commonwealth Bank and FSA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Commonwealth Bank and FSA
The main advantage of trading using opposite Commonwealth Bank and FSA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Commonwealth Bank position performs unexpectedly, FSA 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 FSA will offset losses from the drop in FSA'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 |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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