Correlation Between Commonwealth Bank and Seven West
Can any of the company-specific risk be diversified away by investing in both Commonwealth Bank and Seven West 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 Seven West into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Commonwealth Bank and Seven West Media, you can compare the effects of market volatilities on Commonwealth Bank and Seven West 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 Seven West. Check out your portfolio center. Please also check ongoing floating volatility patterns of Commonwealth Bank and Seven West.
Diversification Opportunities for Commonwealth Bank and Seven West
-0.62 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Commonwealth and Seven is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Commonwealth Bank and Seven West Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seven West Media 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 Seven West. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seven West Media has no effect on the direction of Commonwealth Bank i.e., Commonwealth Bank and Seven West go up and down completely randomly.
Pair Corralation between Commonwealth Bank and Seven West
Assuming the 90 days trading horizon Commonwealth Bank is expected to generate 0.31 times more return on investment than Seven West. However, Commonwealth Bank is 3.22 times less risky than Seven West. It trades about 0.37 of its potential returns per unit of risk. Seven West Media is currently generating about 0.02 per unit of risk. If you would invest 14,293 in Commonwealth Bank on August 31, 2024 and sell it today you would earn a total of 1,565 from holding Commonwealth Bank or generate 10.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Commonwealth Bank vs. Seven West Media
Performance |
| Timeline |
| Commonwealth Bank |
| Seven West Media |
Commonwealth Bank and Seven West Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Commonwealth Bank and Seven West
The main advantage of trading using opposite Commonwealth Bank and Seven West positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Commonwealth Bank position performs unexpectedly, Seven West 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 Seven West will offset losses from the drop in Seven West's long position.| Commonwealth Bank vs. Oneview Healthcare PLC | Commonwealth Bank vs. Mayfield Childcare | Commonwealth Bank vs. Toys R Us | Commonwealth Bank vs. Event Hospitality and |
| Seven West vs. Aneka Tambang Tbk | Seven West vs. Woolworths | Seven West vs. Commonwealth Bank | Seven West vs. BHP Group Limited |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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