Correlation Between Commonwealth Bank and Peel Mining
Can any of the company-specific risk be diversified away by investing in both Commonwealth Bank and Peel Mining 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 Peel Mining into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Commonwealth Bank and Peel Mining, you can compare the effects of market volatilities on Commonwealth Bank and Peel Mining 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 Peel Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Commonwealth Bank and Peel Mining.
Diversification Opportunities for Commonwealth Bank and Peel Mining
0.12 | Correlation Coefficient |
Average diversification
The 3 months correlation between Commonwealth and Peel is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Commonwealth Bank and Peel Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Peel Mining 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 Peel Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Peel Mining has no effect on the direction of Commonwealth Bank i.e., Commonwealth Bank and Peel Mining go up and down completely randomly.
Pair Corralation between Commonwealth Bank and Peel Mining
Assuming the 90 days trading horizon Commonwealth Bank is expected to generate 0.42 times more return on investment than Peel Mining. However, Commonwealth Bank is 2.4 times less risky than Peel Mining. It trades about 0.18 of its potential returns per unit of risk. Peel Mining is currently generating about -0.1 per unit of risk. If you would invest 14,979 in Commonwealth Bank on September 12, 2024 and sell it today you would earn a total of 784.00 from holding Commonwealth Bank or generate 5.23% 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. Peel Mining
Performance |
| Timeline |
| Commonwealth Bank |
| Peel Mining |
Commonwealth Bank and Peel Mining Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Commonwealth Bank and Peel Mining
The main advantage of trading using opposite Commonwealth Bank and Peel Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Commonwealth Bank position performs unexpectedly, Peel Mining 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 Peel Mining will offset losses from the drop in Peel Mining'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 |
| Peel Mining vs. Northern Star Resources | Peel Mining vs. Evolution Mining | Peel Mining vs. Bluescope Steel | Peel Mining vs. Sandfire Resources NL |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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