Correlation Between Commonwealth Bank and CSL
Can any of the company-specific risk be diversified away by investing in both Commonwealth Bank and CSL 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 CSL 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 CSL, you can compare the effects of market volatilities on Commonwealth Bank and CSL 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 CSL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Commonwealth Bank and CSL.
Diversification Opportunities for Commonwealth Bank and CSL
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Commonwealth and CSL is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Commonwealth Bank of and CSL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CSL 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 CSL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CSL has no effect on the direction of Commonwealth Bank i.e., Commonwealth Bank and CSL go up and down completely randomly.
Pair Corralation between Commonwealth Bank and CSL
Assuming the 90 days trading horizon Commonwealth Bank of is expected to generate 0.29 times more return on investment than CSL. However, Commonwealth Bank of is 3.42 times less risky than CSL. It trades about 0.06 of its potential returns per unit of risk. CSL is currently generating about -0.01 per unit of risk. If you would invest 9,324 in Commonwealth Bank of on August 23, 2024 and sell it today you would earn a total of 961.00 from holding Commonwealth Bank of or generate 10.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Commonwealth Bank of vs. CSL
Performance |
| Timeline |
| Commonwealth Bank |
| CSL |
Commonwealth Bank and CSL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Commonwealth Bank and CSL
The main advantage of trading using opposite Commonwealth Bank and CSL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Commonwealth Bank position performs unexpectedly, CSL 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 CSL will offset losses from the drop in CSL's long position.| 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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