Correlation Between Commonwealth Bank and Strickland Metals
Can any of the company-specific risk be diversified away by investing in both Commonwealth Bank and Strickland Metals 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 Strickland Metals 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 Strickland Metals, you can compare the effects of market volatilities on Commonwealth Bank and Strickland Metals 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 Strickland Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Commonwealth Bank and Strickland Metals.
Diversification Opportunities for Commonwealth Bank and Strickland Metals
-0.4 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Commonwealth and Strickland is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Commonwealth Bank of and Strickland Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Strickland Metals 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 Strickland Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Strickland Metals has no effect on the direction of Commonwealth Bank i.e., Commonwealth Bank and Strickland Metals go up and down completely randomly.
Pair Corralation between Commonwealth Bank and Strickland Metals
Assuming the 90 days trading horizon Commonwealth Bank of is expected to generate 0.05 times more return on investment than Strickland Metals. However, Commonwealth Bank of is 21.07 times less risky than Strickland Metals. It trades about 0.1 of its potential returns per unit of risk. Strickland Metals is currently generating about -0.1 per unit of risk. If you would invest 10,125 in Commonwealth Bank of on August 29, 2024 and sell it today you would earn a total of 87.00 from holding Commonwealth Bank of or generate 0.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 97.67% |
| Values | Daily Returns |
Commonwealth Bank of vs. Strickland Metals
Performance |
| Timeline |
| Commonwealth Bank |
| Strickland Metals |
Commonwealth Bank and Strickland Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Commonwealth Bank and Strickland Metals
The main advantage of trading using opposite Commonwealth Bank and Strickland Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Commonwealth Bank position performs unexpectedly, Strickland Metals 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 Strickland Metals will offset losses from the drop in Strickland Metals' long position.| Commonwealth Bank vs. Centaurus Metals | Commonwealth Bank vs. Australian United Investment | Commonwealth Bank vs. Alternative Investment Trust | Commonwealth Bank vs. Lendlease Group |
| Strickland Metals vs. Northern Star Resources | Strickland Metals vs. Evolution Mining | Strickland Metals vs. Bluescope Steel | Strickland Metals vs. Sandfire Resources NL |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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