Correlation Between Commonwealth Bank and Ampol
Can any of the company-specific risk be diversified away by investing in both Commonwealth Bank and Ampol 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 Ampol 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 Ampol, you can compare the effects of market volatilities on Commonwealth Bank and Ampol 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 Ampol. Check out your portfolio center. Please also check ongoing floating volatility patterns of Commonwealth Bank and Ampol.
Diversification Opportunities for Commonwealth Bank and Ampol
-0.24 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Commonwealth and Ampol is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Commonwealth Bank of and Ampol in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ampol 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 Ampol. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ampol has no effect on the direction of Commonwealth Bank i.e., Commonwealth Bank and Ampol go up and down completely randomly.
Pair Corralation between Commonwealth Bank and Ampol
Assuming the 90 days trading horizon Commonwealth Bank is expected to generate 18.58 times less return on investment than Ampol. But when comparing it to its historical volatility, Commonwealth Bank of is 2.39 times less risky than Ampol. It trades about 0.02 of its potential returns per unit of risk. Ampol is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 2,790 in Ampol on September 1, 2024 and sell it today you would earn a total of 119.00 from holding Ampol or generate 4.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Commonwealth Bank of vs. Ampol
Performance |
| Timeline |
| Commonwealth Bank |
| Ampol |
Commonwealth Bank and Ampol Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Commonwealth Bank and Ampol
The main advantage of trading using opposite Commonwealth Bank and Ampol positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Commonwealth Bank position performs unexpectedly, Ampol 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 Ampol will offset losses from the drop in Ampol's long position.| Commonwealth Bank vs. Westpac Banking | Commonwealth Bank vs. Commonwealth Bank | Commonwealth Bank vs. Commonwealth Bank of | Commonwealth Bank 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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