Correlation Between Commonwealth Bank and Macquarie Bank
Can any of the company-specific risk be diversified away by investing in both Commonwealth Bank and Macquarie Bank 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 Macquarie Bank 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 Macquarie Bank Limited, you can compare the effects of market volatilities on Commonwealth Bank and Macquarie Bank 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 Macquarie Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Commonwealth Bank and Macquarie Bank.
Diversification Opportunities for Commonwealth Bank and Macquarie Bank
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Commonwealth and Macquarie is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Commonwealth Bank of and Macquarie Bank Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Macquarie Bank 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 Macquarie Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Macquarie Bank has no effect on the direction of Commonwealth Bank i.e., Commonwealth Bank and Macquarie Bank go up and down completely randomly.
Pair Corralation between Commonwealth Bank and Macquarie Bank
Assuming the 90 days trading horizon Commonwealth Bank is expected to generate 6.76 times less return on investment than Macquarie Bank. But when comparing it to its historical volatility, Commonwealth Bank of is 1.02 times less risky than Macquarie Bank. It trades about 0.01 of its potential returns per unit of risk. Macquarie Bank Limited is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 10,301 in Macquarie Bank Limited on September 2, 2024 and sell it today you would earn a total of 100.00 from holding Macquarie Bank Limited or generate 0.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Commonwealth Bank of vs. Macquarie Bank Limited
Performance |
| Timeline |
| Commonwealth Bank |
| Macquarie Bank |
Commonwealth Bank and Macquarie Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Commonwealth Bank and Macquarie Bank
The main advantage of trading using opposite Commonwealth Bank and Macquarie Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Commonwealth Bank position performs unexpectedly, Macquarie Bank 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 Macquarie Bank will offset losses from the drop in Macquarie Bank's long position.| Commonwealth Bank vs. Westpac Banking | Commonwealth Bank vs. Commonwealth Bank | Commonwealth Bank vs. Commonwealth Bank of | Commonwealth Bank vs. Australia and New |
| Macquarie Bank vs. MFF Capital Investments | Macquarie Bank vs. Pinnacle Investment Management | Macquarie Bank vs. Regal Investment | Macquarie Bank vs. Truscott Mining Corp |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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