Correlation Between Commonwealth Bank and AMP
Can any of the company-specific risk be diversified away by investing in both Commonwealth Bank and AMP 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 AMP 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 AMP, you can compare the effects of market volatilities on Commonwealth Bank and AMP 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 AMP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Commonwealth Bank and AMP.
Diversification Opportunities for Commonwealth Bank and AMP
-0.23 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Commonwealth and AMP is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Commonwealth Bank of and AMP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AMP 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 AMP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AMP has no effect on the direction of Commonwealth Bank i.e., Commonwealth Bank and AMP go up and down completely randomly.
Pair Corralation between Commonwealth Bank and AMP
Assuming the 90 days trading horizon Commonwealth Bank of is expected to generate 0.07 times more return on investment than AMP. However, Commonwealth Bank of is 13.77 times less risky than AMP. It trades about 0.23 of its potential returns per unit of risk. AMP is currently generating about -0.32 per unit of risk. If you would invest 10,480 in Commonwealth Bank of on November 28, 2024 and sell it today you would earn a total of 130.00 from holding Commonwealth Bank of or generate 1.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Commonwealth Bank of vs. AMP
Performance |
| Timeline |
| Commonwealth Bank |
| AMP |
Commonwealth Bank and AMP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Commonwealth Bank and AMP
The main advantage of trading using opposite Commonwealth Bank and AMP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Commonwealth Bank position performs unexpectedly, AMP 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 AMP will offset losses from the drop in AMP's long position.| Commonwealth Bank vs. Bluescope Steel | Commonwealth Bank vs. Carnegie Clean Energy | Commonwealth Bank vs. My Foodie Box | Commonwealth Bank vs. Iron Road |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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