Correlation Between Commonwealth Bank and Polymetals Resources
Can any of the company-specific risk be diversified away by investing in both Commonwealth Bank and Polymetals 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 Polymetals 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 Polymetals Resources, you can compare the effects of market volatilities on Commonwealth Bank and Polymetals 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 Polymetals Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Commonwealth Bank and Polymetals Resources.
Diversification Opportunities for Commonwealth Bank and Polymetals Resources
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Commonwealth and Polymetals is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Commonwealth Bank and Polymetals Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Polymetals 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 Polymetals Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Polymetals Resources has no effect on the direction of Commonwealth Bank i.e., Commonwealth Bank and Polymetals Resources go up and down completely randomly.
Pair Corralation between Commonwealth Bank and Polymetals Resources
Assuming the 90 days trading horizon Commonwealth Bank is expected to generate 2.97 times less return on investment than Polymetals Resources. But when comparing it to its historical volatility, Commonwealth Bank is 5.2 times less risky than Polymetals Resources. It trades about 0.16 of its potential returns per unit of risk. Polymetals Resources is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 30.00 in Polymetals Resources on September 2, 2024 and sell it today you would earn a total of 46.00 from holding Polymetals Resources or generate 153.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Commonwealth Bank vs. Polymetals Resources
Performance |
| Timeline |
| Commonwealth Bank |
| Polymetals Resources |
Commonwealth Bank and Polymetals Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Commonwealth Bank and Polymetals Resources
The main advantage of trading using opposite Commonwealth Bank and Polymetals Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Commonwealth Bank position performs unexpectedly, Polymetals 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 Polymetals Resources will offset losses from the drop in Polymetals Resources' long position.| Commonwealth Bank vs. Macquarie Group | Commonwealth Bank vs. Rio Tinto | Commonwealth Bank vs. CSL | Commonwealth Bank vs. Commonwealth Bank of |
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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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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