Correlation Between Commonwealth Bank and ASX
Can any of the company-specific risk be diversified away by investing in both Commonwealth Bank and ASX 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 ASX 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 ASX, you can compare the effects of market volatilities on Commonwealth Bank and ASX 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 ASX. Check out your portfolio center. Please also check ongoing floating volatility patterns of Commonwealth Bank and ASX.
Diversification Opportunities for Commonwealth Bank and ASX
0.19 | Correlation Coefficient |
Average diversification
The 3 months correlation between Commonwealth and ASX is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Commonwealth Bank of and ASX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ASX 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 ASX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ASX has no effect on the direction of Commonwealth Bank i.e., Commonwealth Bank and ASX go up and down completely randomly.
Pair Corralation between Commonwealth Bank and ASX
Assuming the 90 days trading horizon Commonwealth Bank is expected to generate 16.51 times less return on investment than ASX. But when comparing it to its historical volatility, Commonwealth Bank of is 5.15 times less risky than ASX. It trades about 0.11 of its potential returns per unit of risk. ASX is currently generating about 0.37 of returns per unit of risk over similar time horizon. If you would invest 6,094 in ASX on December 4, 2024 and sell it today you would earn a total of 635.00 from holding ASX or generate 10.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Commonwealth Bank of vs. ASX
Performance |
| Timeline |
| Commonwealth Bank |
| ASX |
Commonwealth Bank and ASX Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Commonwealth Bank and ASX
The main advantage of trading using opposite Commonwealth Bank and ASX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Commonwealth Bank position performs unexpectedly, ASX 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 ASX will offset losses from the drop in ASX's long position.| Commonwealth Bank vs. Arc Funds | Commonwealth Bank vs. Legacy Iron Ore | Commonwealth Bank vs. Argo Investments | Commonwealth Bank vs. The Environmental Group |
| ASX vs. Argo Investments | ASX vs. REGAL ASIAN INVESTMENTS | ASX vs. Microequities Asset Management | ASX vs. Clime Investment Management |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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