Correlation Between Commonwealth Bank and Steamships Trading
Can any of the company-specific risk be diversified away by investing in both Commonwealth Bank and Steamships Trading 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 Steamships Trading into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Commonwealth Bank and Steamships Trading, you can compare the effects of market volatilities on Commonwealth Bank and Steamships Trading 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 Steamships Trading. Check out your portfolio center. Please also check ongoing floating volatility patterns of Commonwealth Bank and Steamships Trading.
Diversification Opportunities for Commonwealth Bank and Steamships Trading
-0.22 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Commonwealth and Steamships is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Commonwealth Bank and Steamships Trading in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Steamships Trading 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 Steamships Trading. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Steamships Trading has no effect on the direction of Commonwealth Bank i.e., Commonwealth Bank and Steamships Trading go up and down completely randomly.
Pair Corralation between Commonwealth Bank and Steamships Trading
Assuming the 90 days trading horizon Commonwealth Bank is expected to generate 1.16 times more return on investment than Steamships Trading. However, Commonwealth Bank is 1.16 times more volatile than Steamships Trading. It trades about 0.19 of its potential returns per unit of risk. Steamships Trading is currently generating about -0.07 per unit of risk. If you would invest 11,912 in Commonwealth Bank on September 1, 2024 and sell it today you would earn a total of 3,946 from holding Commonwealth Bank or generate 33.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Commonwealth Bank vs. Steamships Trading
Performance |
| Timeline |
| Commonwealth Bank |
| Steamships Trading |
Commonwealth Bank and Steamships Trading Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Commonwealth Bank and Steamships Trading
The main advantage of trading using opposite Commonwealth Bank and Steamships Trading positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Commonwealth Bank position performs unexpectedly, Steamships Trading 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 Steamships Trading will offset losses from the drop in Steamships Trading's long position.| Commonwealth Bank vs. Phoslock Environmental Technologies | Commonwealth Bank vs. Global Health | Commonwealth Bank vs. Air New Zealand | Commonwealth Bank vs. Vulcan Steel |
| Steamships Trading vs. Encounter Resources | Steamships Trading vs. Tlou Energy | Steamships Trading vs. Elevate Uranium | Steamships Trading vs. Superior Resources |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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