Correlation Between Collins Foods and Commonwealth Bank
Can any of the company-specific risk be diversified away by investing in both Collins Foods and Commonwealth 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 Collins Foods and Commonwealth Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Collins Foods and Commonwealth Bank of, you can compare the effects of market volatilities on Collins Foods and Commonwealth 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 Collins Foods with a short position of Commonwealth Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Collins Foods and Commonwealth Bank.
Diversification Opportunities for Collins Foods and Commonwealth Bank
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Collins and Commonwealth is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Collins Foods and Commonwealth Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commonwealth Bank and Collins Foods 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 Collins Foods are associated (or correlated) with Commonwealth Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Commonwealth Bank has no effect on the direction of Collins Foods i.e., Collins Foods and Commonwealth Bank go up and down completely randomly.
Pair Corralation between Collins Foods and Commonwealth Bank
Assuming the 90 days trading horizon Collins Foods is expected to generate 6.74 times more return on investment than Commonwealth Bank. However, Collins Foods is 6.74 times more volatile than Commonwealth Bank of. It trades about 0.03 of its potential returns per unit of risk. Commonwealth Bank of is currently generating about 0.06 per unit of risk. If you would invest 722.00 in Collins Foods on September 3, 2024 and sell it today you would earn a total of 137.00 from holding Collins Foods or generate 18.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Collins Foods vs. Commonwealth Bank of
Performance |
| Timeline |
| Collins Foods |
| Commonwealth Bank |
Collins Foods and Commonwealth Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Collins Foods and Commonwealth Bank
The main advantage of trading using opposite Collins Foods and Commonwealth Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Collins Foods position performs unexpectedly, Commonwealth 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 Commonwealth Bank will offset losses from the drop in Commonwealth Bank's long position.| Collins Foods vs. Westpac Banking | Collins Foods vs. Champion Iron | Collins Foods vs. iShares Global Healthcare | Collins Foods vs. Peel Mining |
| Commonwealth Bank vs. Ras Technology Holdings | Commonwealth Bank vs. Alto Metals | Commonwealth Bank vs. Green Technology Metals | Commonwealth Bank vs. Collins Foods |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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