Correlation Between Commonwealth Bank and Agricultural Bank
Can any of the company-specific risk be diversified away by investing in both Commonwealth Bank and Agricultural 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 Agricultural Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Commonwealth Bank and Agricultural Bank, you can compare the effects of market volatilities on Commonwealth Bank and Agricultural 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 Agricultural Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Commonwealth Bank and Agricultural Bank.
Diversification Opportunities for Commonwealth Bank and Agricultural Bank
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Commonwealth and Agricultural is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Commonwealth Bank and Agricultural Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Agricultural 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 are associated (or correlated) with Agricultural Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Agricultural Bank has no effect on the direction of Commonwealth Bank i.e., Commonwealth Bank and Agricultural Bank go up and down completely randomly.
Pair Corralation between Commonwealth Bank and Agricultural Bank
Assuming the 90 days horizon Commonwealth Bank is expected to generate 2.96 times less return on investment than Agricultural Bank. But when comparing it to its historical volatility, Commonwealth Bank is 2.23 times less risky than Agricultural Bank. It trades about 0.05 of its potential returns per unit of risk. Agricultural Bank is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 26.00 in Agricultural Bank on August 24, 2024 and sell it today you would earn a total of 21.00 from holding Agricultural Bank or generate 80.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.69% |
| Values | Daily Returns |
Commonwealth Bank vs. Agricultural Bank
Performance |
| Timeline |
| Commonwealth Bank |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Agricultural Bank |
Commonwealth Bank and Agricultural Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Commonwealth Bank and Agricultural Bank
The main advantage of trading using opposite Commonwealth Bank and Agricultural Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Commonwealth Bank position performs unexpectedly, Agricultural 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 Agricultural Bank will offset losses from the drop in Agricultural Bank's long position.| Commonwealth Bank vs. National Australia Bank | Commonwealth Bank vs. China Construction Bank | Commonwealth Bank vs. Bank of America | Commonwealth Bank vs. ANZ Group Holdings |
| Agricultural Bank vs. China Construction Bank | Agricultural Bank vs. National Australia Bank | Agricultural Bank vs. Svenska Handelsbanken AB | Agricultural Bank vs. Bank of America |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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