Correlation Between Commonwealth Bank and Summerset Group
Can any of the company-specific risk be diversified away by investing in both Commonwealth Bank and Summerset Group 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 Summerset Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Commonwealth Bank and Summerset Group Holdings, you can compare the effects of market volatilities on Commonwealth Bank and Summerset Group 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 Summerset Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Commonwealth Bank and Summerset Group.
Diversification Opportunities for Commonwealth Bank and Summerset Group
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Commonwealth and Summerset is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Commonwealth Bank and Summerset Group Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Summerset Group Holdings 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 Summerset Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Summerset Group Holdings has no effect on the direction of Commonwealth Bank i.e., Commonwealth Bank and Summerset Group go up and down completely randomly.
Pair Corralation between Commonwealth Bank and Summerset Group
Assuming the 90 days trading horizon Commonwealth Bank is expected to generate 0.67 times more return on investment than Summerset Group. However, Commonwealth Bank is 1.5 times less risky than Summerset Group. It trades about 0.18 of its potential returns per unit of risk. Summerset Group Holdings is currently generating about 0.07 per unit of risk. If you would invest 13,334 in Commonwealth Bank on October 31, 2024 and sell it today you would earn a total of 2,575 from holding Commonwealth Bank or generate 19.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Commonwealth Bank vs. Summerset Group Holdings
Performance |
| Timeline |
| Commonwealth Bank |
| Summerset Group Holdings |
Commonwealth Bank and Summerset Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Commonwealth Bank and Summerset Group
The main advantage of trading using opposite Commonwealth Bank and Summerset Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Commonwealth Bank position performs unexpectedly, Summerset Group 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 Summerset Group will offset losses from the drop in Summerset Group's long position.| Commonwealth Bank vs. Evolution Mining | Commonwealth Bank vs. Southern Cross Media | Commonwealth Bank vs. Australian Unity Office | Commonwealth Bank vs. Autosports Group |
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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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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