Correlation Between Commonwealth Bank and Brookside Energy
Can any of the company-specific risk be diversified away by investing in both Commonwealth Bank and Brookside 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 Brookside Energy 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 Brookside Energy, you can compare the effects of market volatilities on Commonwealth Bank and Brookside 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 Brookside Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Commonwealth Bank and Brookside Energy.
Diversification Opportunities for Commonwealth Bank and Brookside Energy
-0.36 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Commonwealth and Brookside is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Commonwealth Bank of and Brookside Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brookside Energy 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 Brookside Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brookside Energy has no effect on the direction of Commonwealth Bank i.e., Commonwealth Bank and Brookside Energy go up and down completely randomly.
Pair Corralation between Commonwealth Bank and Brookside Energy
Assuming the 90 days trading horizon Commonwealth Bank is expected to generate 29.14 times less return on investment than Brookside Energy. But when comparing it to its historical volatility, Commonwealth Bank of is 14.1 times less risky than Brookside Energy. It trades about 0.12 of its potential returns per unit of risk. Brookside Energy is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 45.00 in Brookside Energy on October 15, 2024 and sell it today you would earn a total of 5.00 from holding Brookside Energy or generate 11.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Commonwealth Bank of vs. Brookside Energy
Performance |
| Timeline |
| Commonwealth Bank |
| Brookside Energy |
Commonwealth Bank and Brookside Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Commonwealth Bank and Brookside Energy
The main advantage of trading using opposite Commonwealth Bank and Brookside Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Commonwealth Bank position performs unexpectedly, Brookside 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 Brookside Energy will offset losses from the drop in Brookside Energy's long position.| Commonwealth Bank vs. Event Hospitality and | Commonwealth Bank vs. Commonwealth Bank of | Commonwealth Bank vs. Fisher Paykel Healthcare | Commonwealth Bank vs. Auswide Bank |
| Brookside Energy vs. Westpac Banking | Brookside Energy vs. ABACUS STORAGE KING | Brookside Energy vs. Odyssey Energy | Brookside Energy vs. Qantas Airways |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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