Correlation Between Credit Agricole and Commerzbank
Can any of the company-specific risk be diversified away by investing in both Credit Agricole and Commerzbank 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 Credit Agricole and Commerzbank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Credit Agricole SA and Commerzbank AG PK, you can compare the effects of market volatilities on Credit Agricole and Commerzbank 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 Credit Agricole with a short position of Commerzbank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Credit Agricole and Commerzbank.
Diversification Opportunities for Credit Agricole and Commerzbank
-0.04 | Correlation Coefficient |
Good diversification
The 3 months correlation between Credit and Commerzbank is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Credit Agricole SA and Commerzbank AG PK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commerzbank AG PK and Credit Agricole 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 Credit Agricole SA are associated (or correlated) with Commerzbank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Commerzbank AG PK has no effect on the direction of Credit Agricole i.e., Credit Agricole and Commerzbank go up and down completely randomly.
Pair Corralation between Credit Agricole and Commerzbank
Assuming the 90 days horizon Credit Agricole SA is expected to under-perform the Commerzbank. But the pink sheet apears to be less risky and, when comparing its historical volatility, Credit Agricole SA is 1.04 times less risky than Commerzbank. The pink sheet trades about -0.32 of its potential returns per unit of risk. The Commerzbank AG PK is currently generating about -0.25 of returns per unit of risk over similar time horizon. If you would invest 1,752 in Commerzbank AG PK on August 27, 2024 and sell it today you would lose (159.00) from holding Commerzbank AG PK or give up 9.08% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Credit Agricole SA vs. Commerzbank AG PK
Performance |
| Timeline |
| Credit Agricole SA |
| Commerzbank AG PK |
Credit Agricole and Commerzbank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Credit Agricole and Commerzbank
The main advantage of trading using opposite Credit Agricole and Commerzbank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Credit Agricole position performs unexpectedly, Commerzbank 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 Commerzbank will offset losses from the drop in Commerzbank's long position.The idea behind Credit Agricole SA and Commerzbank AG PK pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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