Correlation Between Commonwealth Bank and Safe
Can any of the company-specific risk be diversified away by investing in both Commonwealth Bank and Safe 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 Safe 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 Safe and Green, you can compare the effects of market volatilities on Commonwealth Bank and Safe 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 Safe. Check out your portfolio center. Please also check ongoing floating volatility patterns of Commonwealth Bank and Safe.
Diversification Opportunities for Commonwealth Bank and Safe
-0.54 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Commonwealth and Safe is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Commonwealth Bank of and Safe and Green in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Safe and Green 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 Safe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Safe and Green has no effect on the direction of Commonwealth Bank i.e., Commonwealth Bank and Safe go up and down completely randomly.
Pair Corralation between Commonwealth Bank and Safe
Assuming the 90 days horizon Commonwealth Bank of is expected to generate 0.12 times more return on investment than Safe. However, Commonwealth Bank of is 8.03 times less risky than Safe. It trades about 0.13 of its potential returns per unit of risk. Safe and Green is currently generating about -0.2 per unit of risk. If you would invest 9,354 in Commonwealth Bank of on August 30, 2024 and sell it today you would earn a total of 636.00 from holding Commonwealth Bank of or generate 6.8% 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. Safe and Green
Performance |
| Timeline |
| Commonwealth Bank |
| Safe and Green |
Commonwealth Bank and Safe Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Commonwealth Bank and Safe
The main advantage of trading using opposite Commonwealth Bank and Safe positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Commonwealth Bank position performs unexpectedly, Safe 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 Safe will offset losses from the drop in Safe's long position.| Commonwealth Bank vs. Svenska Handelsbanken PK | Commonwealth Bank vs. ANZ Group Holdings | Commonwealth Bank vs. Westpac Banking | Commonwealth Bank vs. National Australia Bank |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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