Correlation Between Commonwealth Bank and Wam Capital
Can any of the company-specific risk be diversified away by investing in both Commonwealth Bank and Wam Capital 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 Wam Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Commonwealth Bank and Wam Capital, you can compare the effects of market volatilities on Commonwealth Bank and Wam Capital 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 Wam Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Commonwealth Bank and Wam Capital.
Diversification Opportunities for Commonwealth Bank and Wam Capital
-0.4 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Commonwealth and Wam is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Commonwealth Bank and Wam Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wam Capital 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 Wam Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wam Capital has no effect on the direction of Commonwealth Bank i.e., Commonwealth Bank and Wam Capital go up and down completely randomly.
Pair Corralation between Commonwealth Bank and Wam Capital
Assuming the 90 days trading horizon Commonwealth Bank is expected to generate 0.94 times more return on investment than Wam Capital. However, Commonwealth Bank is 1.06 times less risky than Wam Capital. It trades about 0.1 of its potential returns per unit of risk. Wam Capital is currently generating about 0.03 per unit of risk. If you would invest 9,667 in Commonwealth Bank on September 13, 2024 and sell it today you would earn a total of 6,085 from holding Commonwealth Bank or generate 62.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Commonwealth Bank vs. Wam Capital
Performance |
| Timeline |
| Commonwealth Bank |
| Wam Capital |
Commonwealth Bank and Wam Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Commonwealth Bank and Wam Capital
The main advantage of trading using opposite Commonwealth Bank and Wam Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Commonwealth Bank position performs unexpectedly, Wam Capital 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 Wam Capital will offset losses from the drop in Wam Capital's long position.| Commonwealth Bank vs. Autosports Group | Commonwealth Bank vs. Richmond Vanadium Technology | Commonwealth Bank vs. Retail Food Group | Commonwealth Bank vs. Mach7 Technologies |
| Wam Capital vs. Australian Strategic Materials | Wam Capital vs. Stelar Metals | Wam Capital vs. Collins Foods | Wam Capital vs. Beston Global Food |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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