Correlation Between Commonwealth Bank and Austchina Holdings
Can any of the company-specific risk be diversified away by investing in both Commonwealth Bank and Austchina Holdings 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 Austchina Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Commonwealth Bank of and Austchina Holdings, you can compare the effects of market volatilities on Commonwealth Bank and Austchina Holdings 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 Austchina Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Commonwealth Bank and Austchina Holdings.
Diversification Opportunities for Commonwealth Bank and Austchina Holdings
-0.61 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Commonwealth and Austchina is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Commonwealth Bank of and Austchina Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Austchina 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 of are associated (or correlated) with Austchina Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Austchina Holdings has no effect on the direction of Commonwealth Bank i.e., Commonwealth Bank and Austchina Holdings go up and down completely randomly.
Pair Corralation between Commonwealth Bank and Austchina Holdings
Assuming the 90 days trading horizon Commonwealth Bank is expected to generate 10.39 times less return on investment than Austchina Holdings. But when comparing it to its historical volatility, Commonwealth Bank of is 62.33 times less risky than Austchina Holdings. It trades about 0.07 of its potential returns per unit of risk. Austchina Holdings is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 0.40 in Austchina Holdings on September 1, 2024 and sell it today you would lose (0.30) from holding Austchina Holdings or give up 75.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.48% |
| Values | Daily Returns |
Commonwealth Bank of vs. Austchina Holdings
Performance |
| Timeline |
| Commonwealth Bank |
| Austchina Holdings |
Commonwealth Bank and Austchina Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Commonwealth Bank and Austchina Holdings
The main advantage of trading using opposite Commonwealth Bank and Austchina Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Commonwealth Bank position performs unexpectedly, Austchina Holdings 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 Austchina Holdings will offset losses from the drop in Austchina Holdings' long position.| Commonwealth Bank vs. BTC Health Limited | Commonwealth Bank vs. Queste Communications | Commonwealth Bank vs. Stelar Metals | Commonwealth Bank vs. Epsilon Healthcare |
| Austchina Holdings vs. Westpac Banking | Austchina Holdings vs. ABACUS STORAGE KING | Austchina Holdings vs. Odyssey Energy | Austchina Holdings vs. Imricor Medical Systems |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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