Correlation Between Commonwealth Bank and Iluka Resources
Can any of the company-specific risk be diversified away by investing in both Commonwealth Bank and Iluka Resources 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 Iluka Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Commonwealth Bank and Iluka Resources, you can compare the effects of market volatilities on Commonwealth Bank and Iluka Resources 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 Iluka Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Commonwealth Bank and Iluka Resources.
Diversification Opportunities for Commonwealth Bank and Iluka Resources
-0.83 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Commonwealth and Iluka is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Commonwealth Bank and Iluka Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iluka Resources 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 Iluka Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iluka Resources has no effect on the direction of Commonwealth Bank i.e., Commonwealth Bank and Iluka Resources go up and down completely randomly.
Pair Corralation between Commonwealth Bank and Iluka Resources
Assuming the 90 days trading horizon Commonwealth Bank is expected to generate 0.48 times more return on investment than Iluka Resources. However, Commonwealth Bank is 2.06 times less risky than Iluka Resources. It trades about 0.19 of its potential returns per unit of risk. Iluka Resources is currently generating about -0.04 per unit of risk. If you would invest 9,309 in Commonwealth Bank on August 26, 2024 and sell it today you would earn a total of 6,594 from holding Commonwealth Bank or generate 70.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Commonwealth Bank vs. Iluka Resources
Performance |
| Timeline |
| Commonwealth Bank |
| Iluka Resources |
Commonwealth Bank and Iluka Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Commonwealth Bank and Iluka Resources
The main advantage of trading using opposite Commonwealth Bank and Iluka Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Commonwealth Bank position performs unexpectedly, Iluka Resources 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 Iluka Resources will offset losses from the drop in Iluka Resources' long position.| Commonwealth Bank vs. Kkr Credit Income | Commonwealth Bank vs. Macquarie Bank Limited | Commonwealth Bank vs. Step One Clothing | Commonwealth Bank vs. Pioneer Credit |
| Iluka Resources vs. Champion Iron | Iluka Resources vs. Medical Developments International | Iluka Resources vs. Dicker Data | Iluka Resources vs. Phoslock Environmental 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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