Correlation Between Commonwealth Bank and LithiumBank Resources
Can any of the company-specific risk be diversified away by investing in both Commonwealth Bank and LithiumBank Resources 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 LithiumBank Resources 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 LithiumBank Resources Corp, you can compare the effects of market volatilities on Commonwealth Bank and LithiumBank Resources 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 LithiumBank Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Commonwealth Bank and LithiumBank Resources.
Diversification Opportunities for Commonwealth Bank and LithiumBank Resources
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Commonwealth and LithiumBank is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Commonwealth Bank of and LithiumBank Resources Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LithiumBank Resources 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 LithiumBank Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LithiumBank Resources has no effect on the direction of Commonwealth Bank i.e., Commonwealth Bank and LithiumBank Resources go up and down completely randomly.
Pair Corralation between Commonwealth Bank and LithiumBank Resources
Assuming the 90 days horizon Commonwealth Bank of is expected to generate 0.3 times more return on investment than LithiumBank Resources. However, Commonwealth Bank of is 3.31 times less risky than LithiumBank Resources. It trades about 0.07 of its potential returns per unit of risk. LithiumBank Resources Corp is currently generating about -0.03 per unit of risk. If you would invest 6,578 in Commonwealth Bank of on September 2, 2024 and sell it today you would earn a total of 3,762 from holding Commonwealth Bank of or generate 57.19% 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. LithiumBank Resources Corp
Performance |
| Timeline |
| Commonwealth Bank |
| LithiumBank Resources |
Commonwealth Bank and LithiumBank Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Commonwealth Bank and LithiumBank Resources
The main advantage of trading using opposite Commonwealth Bank and LithiumBank Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Commonwealth Bank position performs unexpectedly, LithiumBank Resources 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 LithiumBank Resources will offset losses from the drop in LithiumBank Resources' long position.| Commonwealth Bank vs. Bank of America | Commonwealth Bank vs. Bank of America | Commonwealth Bank vs. Bank of America | Commonwealth Bank vs. Bank of America |
| LithiumBank Resources vs. Qubec Nickel Corp | LithiumBank Resources vs. IGO Limited | LithiumBank Resources vs. Focus Graphite | LithiumBank Resources vs. Mineral Res |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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