Correlation Between Commonwealth Bank and LGI
Can any of the company-specific risk be diversified away by investing in both Commonwealth Bank and LGI 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 LGI 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 LGI, you can compare the effects of market volatilities on Commonwealth Bank and LGI 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 LGI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Commonwealth Bank and LGI.
Diversification Opportunities for Commonwealth Bank and LGI
-0.45 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Commonwealth and LGI is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Commonwealth Bank of and LGI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LGI 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 LGI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LGI has no effect on the direction of Commonwealth Bank i.e., Commonwealth Bank and LGI go up and down completely randomly.
Pair Corralation between Commonwealth Bank and LGI
Assuming the 90 days trading horizon Commonwealth Bank is expected to generate 4.95 times less return on investment than LGI. But when comparing it to its historical volatility, Commonwealth Bank of is 5.47 times less risky than LGI. It trades about 0.08 of its potential returns per unit of risk. LGI is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 194.00 in LGI on October 18, 2024 and sell it today you would earn a total of 78.00 from holding LGI or generate 40.21% 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. LGI
Performance |
| Timeline |
| Commonwealth Bank |
| LGI |
Commonwealth Bank and LGI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Commonwealth Bank and LGI
The main advantage of trading using opposite Commonwealth Bank and LGI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Commonwealth Bank position performs unexpectedly, LGI 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 LGI will offset losses from the drop in LGI's long position.| Commonwealth Bank vs. Readytech Holdings | Commonwealth Bank vs. Pure Foods Tasmania | Commonwealth Bank vs. Genetic Technologies | Commonwealth Bank vs. Aussie Broadband |
| LGI vs. Aneka Tambang Tbk | LGI vs. Commonwealth Bank | LGI vs. Commonwealth Bank of | LGI vs. Australia and New |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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