Correlation Between Commonwealth Bank and Fast Retailing
Can any of the company-specific risk be diversified away by investing in both Commonwealth Bank and Fast Retailing 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 Fast Retailing 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 Fast Retailing Co, you can compare the effects of market volatilities on Commonwealth Bank and Fast Retailing 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 Fast Retailing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Commonwealth Bank and Fast Retailing.
Diversification Opportunities for Commonwealth Bank and Fast Retailing
-0.1 | Correlation Coefficient |
Good diversification
The 3 months correlation between Commonwealth and Fast is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Commonwealth Bank of and Fast Retailing Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fast Retailing 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 Fast Retailing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fast Retailing has no effect on the direction of Commonwealth Bank i.e., Commonwealth Bank and Fast Retailing go up and down completely randomly.
Pair Corralation between Commonwealth Bank and Fast Retailing
Assuming the 90 days horizon Commonwealth Bank of is expected to generate 0.81 times more return on investment than Fast Retailing. However, Commonwealth Bank of is 1.23 times less risky than Fast Retailing. It trades about 0.08 of its potential returns per unit of risk. Fast Retailing Co is currently generating about -0.12 per unit of risk. If you would invest 9,330 in Commonwealth Bank of on November 28, 2024 and sell it today you would earn a total of 196.00 from holding Commonwealth Bank of or generate 2.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Commonwealth Bank of vs. Fast Retailing Co
Performance |
| Timeline |
| Commonwealth Bank |
| Fast Retailing |
Commonwealth Bank and Fast Retailing Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Commonwealth Bank and Fast Retailing
The main advantage of trading using opposite Commonwealth Bank and Fast Retailing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Commonwealth Bank position performs unexpectedly, Fast Retailing 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 Fast Retailing will offset losses from the drop in Fast Retailing's long position.| Commonwealth Bank vs. Waste Management | Commonwealth Bank vs. MAGIC SOFTWARE ENTR | Commonwealth Bank vs. ASURE SOFTWARE | Commonwealth Bank vs. GBS Software AG |
| Fast Retailing vs. CHIBA BANK | Fast Retailing vs. BIOPHARMA CREDIT DL | Fast Retailing vs. Chengdu PUTIAN Telecommunications | Fast Retailing vs. CREDIT AGRICOLE |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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