Correlation Between Commonwealth Bank and Woolworths
Can any of the company-specific risk be diversified away by investing in both Commonwealth Bank and Woolworths 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 Woolworths 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 Woolworths, you can compare the effects of market volatilities on Commonwealth Bank and Woolworths 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 Woolworths. Check out your portfolio center. Please also check ongoing floating volatility patterns of Commonwealth Bank and Woolworths.
Diversification Opportunities for Commonwealth Bank and Woolworths
-0.88 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Commonwealth and Woolworths is -0.88. Overlapping area represents the amount of risk that can be diversified away by holding Commonwealth Bank of and Woolworths in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Woolworths 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 Woolworths. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Woolworths has no effect on the direction of Commonwealth Bank i.e., Commonwealth Bank and Woolworths go up and down completely randomly.
Pair Corralation between Commonwealth Bank and Woolworths
Assuming the 90 days trading horizon Commonwealth Bank of is expected to generate 0.25 times more return on investment than Woolworths. However, Commonwealth Bank of is 4.02 times less risky than Woolworths. It trades about 0.07 of its potential returns per unit of risk. Woolworths is currently generating about -0.03 per unit of risk. If you would invest 9,610 in Commonwealth Bank of on September 15, 2024 and sell it today you would earn a total of 475.00 from holding Commonwealth Bank of or generate 4.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Commonwealth Bank of vs. Woolworths
Performance |
| Timeline |
| Commonwealth Bank |
| Woolworths |
Commonwealth Bank and Woolworths Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Commonwealth Bank and Woolworths
The main advantage of trading using opposite Commonwealth Bank and Woolworths positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Commonwealth Bank position performs unexpectedly, Woolworths 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 Woolworths will offset losses from the drop in Woolworths' long position.| Commonwealth Bank vs. Ainsworth Game Technology | Commonwealth Bank vs. Aussie Broadband | Commonwealth Bank vs. Sky Metals | Commonwealth Bank vs. Environmental Clean Technologies |
| Woolworths vs. Aneka Tambang Tbk | Woolworths vs. BHP Group Limited | Woolworths vs. Commonwealth Bank of | Woolworths vs. Commonwealth Bank of |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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