Correlation Between Vale SA and Commonwealth Bank
Can any of the company-specific risk be diversified away by investing in both Vale SA 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 Vale SA and Commonwealth Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vale SA and Commonwealth Bank of, you can compare the effects of market volatilities on Vale SA 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 Vale SA with a short position of Commonwealth Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vale SA and Commonwealth Bank.
Diversification Opportunities for Vale SA and Commonwealth Bank
-0.5 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Vale and Commonwealth is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Vale SA and Commonwealth Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commonwealth Bank and Vale SA 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 Vale SA 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 Vale SA i.e., Vale SA and Commonwealth Bank go up and down completely randomly.
Pair Corralation between Vale SA and Commonwealth Bank
Assuming the 90 days trading horizon Vale SA is expected to generate 4.42 times less return on investment than Commonwealth Bank. In addition to that, Vale SA is 1.66 times more volatile than Commonwealth Bank of. It trades about 0.02 of its total potential returns per unit of risk. Commonwealth Bank of is currently generating about 0.13 per unit of volatility. If you would invest 8,767 in Commonwealth Bank of on September 3, 2024 and sell it today you would earn a total of 969.00 from holding Commonwealth Bank of or generate 11.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vale SA vs. Commonwealth Bank of
Performance |
| Timeline |
| Vale SA |
| Commonwealth Bank |
Vale SA and Commonwealth Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vale SA and Commonwealth Bank
The main advantage of trading using opposite Vale SA and Commonwealth Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vale SA 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.| Vale SA vs. Commonwealth Bank of | Vale SA vs. JAPAN TOBACCO UNSPADR12 | Vale SA vs. BRIT AMER TOBACCO | Vale SA vs. UNIVMUSIC GRPADR050 |
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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