Correlation Between Commonwealth Bank and BSP Financial
Can any of the company-specific risk be diversified away by investing in both Commonwealth Bank and BSP Financial 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 BSP Financial 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 BSP Financial Group, you can compare the effects of market volatilities on Commonwealth Bank and BSP Financial 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 BSP Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Commonwealth Bank and BSP Financial.
Diversification Opportunities for Commonwealth Bank and BSP Financial
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Commonwealth and BSP is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Commonwealth Bank of and BSP Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BSP Financial Group 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 BSP Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BSP Financial Group has no effect on the direction of Commonwealth Bank i.e., Commonwealth Bank and BSP Financial go up and down completely randomly.
Pair Corralation between Commonwealth Bank and BSP Financial
Assuming the 90 days trading horizon Commonwealth Bank of is expected to under-perform the BSP Financial. But the stock apears to be less risky and, when comparing its historical volatility, Commonwealth Bank of is 6.15 times less risky than BSP Financial. The stock trades about -0.11 of its potential returns per unit of risk. The BSP Financial Group is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 630.00 in BSP Financial Group on August 29, 2024 and sell it today you would earn a total of 20.00 from holding BSP Financial Group or generate 3.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Commonwealth Bank of vs. BSP Financial Group
Performance |
| Timeline |
| Commonwealth Bank |
| BSP Financial Group |
Commonwealth Bank and BSP Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Commonwealth Bank and BSP Financial
The main advantage of trading using opposite Commonwealth Bank and BSP Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Commonwealth Bank position performs unexpectedly, BSP Financial 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 BSP Financial will offset losses from the drop in BSP Financial's long position.| Commonwealth Bank vs. Dicker Data | Commonwealth Bank vs. Australian Agricultural | Commonwealth Bank vs. Janison Education Group | Commonwealth Bank vs. Aristocrat Leisure |
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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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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