Correlation Between Commonwealth Bank and Sandfire Resources
Can any of the company-specific risk be diversified away by investing in both Commonwealth Bank and Sandfire Resources 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 Sandfire Resources 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 Sandfire Resources NL, you can compare the effects of market volatilities on Commonwealth Bank and Sandfire Resources 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 Sandfire Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Commonwealth Bank and Sandfire Resources.
Diversification Opportunities for Commonwealth Bank and Sandfire Resources
-0.59 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Commonwealth and Sandfire is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Commonwealth Bank of and Sandfire Resources NL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sandfire Resources 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 Sandfire Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sandfire Resources has no effect on the direction of Commonwealth Bank i.e., Commonwealth Bank and Sandfire Resources go up and down completely randomly.
Pair Corralation between Commonwealth Bank and Sandfire Resources
Assuming the 90 days trading horizon Commonwealth Bank is expected to generate 6.07 times less return on investment than Sandfire Resources. But when comparing it to its historical volatility, Commonwealth Bank of is 6.6 times less risky than Sandfire Resources. It trades about 0.06 of its potential returns per unit of risk. Sandfire Resources NL is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 625.00 in Sandfire Resources NL on October 14, 2024 and sell it today you would earn a total of 356.00 from holding Sandfire Resources NL or generate 56.96% 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. Sandfire Resources NL
Performance |
| Timeline |
| Commonwealth Bank |
| Sandfire Resources |
Commonwealth Bank and Sandfire Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Commonwealth Bank and Sandfire Resources
The main advantage of trading using opposite Commonwealth Bank and Sandfire Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Commonwealth Bank position performs unexpectedly, Sandfire Resources 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 Sandfire Resources will offset losses from the drop in Sandfire Resources' long position.| Commonwealth Bank vs. Clime Investment Management | Commonwealth Bank vs. Austco Healthcare | Commonwealth Bank vs. Global Health | Commonwealth Bank vs. EVE Health Group |
| Sandfire Resources vs. Homeco Daily Needs | Sandfire Resources vs. Hudson Investment Group | Sandfire Resources vs. Westpac Banking | Sandfire Resources 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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