Correlation Between Commonwealth Bank and Future Generation
Can any of the company-specific risk be diversified away by investing in both Commonwealth Bank and Future Generation 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 Future Generation 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 Future Generation Australia, you can compare the effects of market volatilities on Commonwealth Bank and Future Generation 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 Future Generation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Commonwealth Bank and Future Generation.
Diversification Opportunities for Commonwealth Bank and Future Generation
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Commonwealth and Future is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Commonwealth Bank of and Future Generation Australia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Future Generation 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 Future Generation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Future Generation has no effect on the direction of Commonwealth Bank i.e., Commonwealth Bank and Future Generation go up and down completely randomly.
Pair Corralation between Commonwealth Bank and Future Generation
Assuming the 90 days trading horizon Commonwealth Bank is expected to generate 1.46 times less return on investment than Future Generation. But when comparing it to its historical volatility, Commonwealth Bank of is 2.95 times less risky than Future Generation. It trades about 0.06 of its potential returns per unit of risk. Future Generation Australia is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 125.00 in Future Generation Australia on November 30, 2024 and sell it today you would earn a total of 1.00 from holding Future Generation Australia or generate 0.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Commonwealth Bank of vs. Future Generation Australia
Performance |
| Timeline |
| Commonwealth Bank |
| Future Generation |
Commonwealth Bank and Future Generation Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Commonwealth Bank and Future Generation
The main advantage of trading using opposite Commonwealth Bank and Future Generation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Commonwealth Bank position performs unexpectedly, Future Generation 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 Future Generation will offset losses from the drop in Future Generation's long position.| Commonwealth Bank vs. Kkr Credit Income | Commonwealth Bank vs. Insignia Financial | Commonwealth Bank vs. Australian Unity Office | Commonwealth Bank vs. Latitude Financial Services |
| Future Generation vs. Oneview Healthcare PLC | Future Generation vs. Resolute Mining | Future Generation vs. Sonic Healthcare | Future Generation vs. Globe Metals Mining |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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