Correlation Between Commonwealth Bank and Vulcan Energy
Can any of the company-specific risk be diversified away by investing in both Commonwealth Bank and Vulcan Energy 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 Vulcan Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Commonwealth Bank and Vulcan Energy Resources, you can compare the effects of market volatilities on Commonwealth Bank and Vulcan Energy 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 Vulcan Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Commonwealth Bank and Vulcan Energy.
Diversification Opportunities for Commonwealth Bank and Vulcan Energy
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Commonwealth and Vulcan is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Commonwealth Bank and Vulcan Energy Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vulcan Energy 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 Vulcan Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vulcan Energy Resources has no effect on the direction of Commonwealth Bank i.e., Commonwealth Bank and Vulcan Energy go up and down completely randomly.
Pair Corralation between Commonwealth Bank and Vulcan Energy
Assuming the 90 days trading horizon Commonwealth Bank is expected to generate 3.52 times less return on investment than Vulcan Energy. But when comparing it to its historical volatility, Commonwealth Bank is 4.02 times less risky than Vulcan Energy. It trades about 0.3 of its potential returns per unit of risk. Vulcan Energy Resources is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest 533.00 in Vulcan Energy Resources on August 30, 2024 and sell it today you would earn a total of 178.00 from holding Vulcan Energy Resources or generate 33.4% 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. Vulcan Energy Resources
Performance |
| Timeline |
| Commonwealth Bank |
| Vulcan Energy Resources |
Commonwealth Bank and Vulcan Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Commonwealth Bank and Vulcan Energy
The main advantage of trading using opposite Commonwealth Bank and Vulcan Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Commonwealth Bank position performs unexpectedly, Vulcan Energy 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 Vulcan Energy will offset losses from the drop in Vulcan Energy's long position.| Commonwealth Bank vs. Treasury Wine Estates | Commonwealth Bank vs. Iron Road | Commonwealth Bank vs. EMvision Medical Devices | Commonwealth Bank vs. Aussie Broadband |
| Vulcan Energy vs. Step One Clothing | Vulcan Energy vs. Janison Education Group | Vulcan Energy vs. Computershare | Vulcan Energy vs. Embark Education Group |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
Other Complementary Tools
| Fundamentals Comparison Compare fundamentals across multiple equities to find investing opportunities | |
| Positions Ratings Determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Cryptocurrency Center Build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency | |
| Commodity Directory Find actively traded commodities issued by global exchanges | |
| Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated |