Correlation Between Commonwealth Bank and Coles
Can any of the company-specific risk be diversified away by investing in both Commonwealth Bank and Coles 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 Coles 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 Coles Group, you can compare the effects of market volatilities on Commonwealth Bank and Coles 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 Coles. Check out your portfolio center. Please also check ongoing floating volatility patterns of Commonwealth Bank and Coles.
Diversification Opportunities for Commonwealth Bank and Coles
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Commonwealth and Coles is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Commonwealth Bank of and Coles Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coles Group 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 Coles. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coles Group has no effect on the direction of Commonwealth Bank i.e., Commonwealth Bank and Coles go up and down completely randomly.
Pair Corralation between Commonwealth Bank and Coles
Assuming the 90 days trading horizon Commonwealth Bank is expected to generate 11.21 times less return on investment than Coles. But when comparing it to its historical volatility, Commonwealth Bank of is 5.71 times less risky than Coles. It trades about 0.05 of its potential returns per unit of risk. Coles Group is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 1,486 in Coles Group on September 1, 2024 and sell it today you would earn a total of 373.00 from holding Coles Group or generate 25.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 99.63% |
| Values | Daily Returns |
Commonwealth Bank of vs. Coles Group
Performance |
| Timeline |
| Commonwealth Bank |
| Coles Group |
Commonwealth Bank and Coles Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Commonwealth Bank and Coles
The main advantage of trading using opposite Commonwealth Bank and Coles positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Commonwealth Bank position performs unexpectedly, Coles 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 Coles will offset losses from the drop in Coles' long position.| Commonwealth Bank vs. Ora Banda Mining | Commonwealth Bank vs. ACDC Metals | Commonwealth Bank vs. Aurelia Metals | Commonwealth Bank vs. Alto Metals |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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