Correlation Between National Retail and Commonwealth Bank
Can any of the company-specific risk be diversified away by investing in both National Retail 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 National Retail and Commonwealth Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between National Retail Properties and Commonwealth Bank of, you can compare the effects of market volatilities on National Retail 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 National Retail with a short position of Commonwealth Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Retail and Commonwealth Bank.
Diversification Opportunities for National Retail and Commonwealth Bank
-0.39 | Correlation Coefficient |
Very good diversification
The 3 months correlation between National and Commonwealth is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding National Retail Properties and Commonwealth Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commonwealth Bank and National Retail 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 National Retail Properties 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 National Retail i.e., National Retail and Commonwealth Bank go up and down completely randomly.
Pair Corralation between National Retail and Commonwealth Bank
Assuming the 90 days trading horizon National Retail is expected to generate 2.98 times less return on investment than Commonwealth Bank. But when comparing it to its historical volatility, National Retail Properties is 1.12 times less risky than Commonwealth Bank. It trades about 0.05 of its potential returns per unit of risk. Commonwealth Bank of is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 6,144 in Commonwealth Bank of on September 4, 2024 and sell it today you would earn a total of 3,592 from holding Commonwealth Bank of or generate 58.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
National Retail Properties vs. Commonwealth Bank of
Performance |
| Timeline |
| National Retail Prop |
| Commonwealth Bank |
National Retail and Commonwealth Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Retail and Commonwealth Bank
The main advantage of trading using opposite National Retail and Commonwealth Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Retail 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.| National Retail vs. Apple Inc | National Retail vs. Apple Inc | National Retail vs. Apple Inc | National Retail vs. Apple Inc |
| Commonwealth Bank vs. CARSALESCOM | Commonwealth Bank vs. National Retail Properties | Commonwealth Bank vs. BROADWIND ENRGY | Commonwealth Bank vs. Fukuyama Transporting Co |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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