Correlation Between Global Health and Commonwealth Bank
Can any of the company-specific risk be diversified away by investing in both Global Health 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 Global Health and Commonwealth Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global Health and Commonwealth Bank, you can compare the effects of market volatilities on Global Health 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 Global Health with a short position of Commonwealth Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Health and Commonwealth Bank.
Diversification Opportunities for Global Health and Commonwealth Bank
-0.12 | Correlation Coefficient |
Good diversification
The 3 months correlation between Global and Commonwealth is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Global Health and Commonwealth Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commonwealth Bank and Global Health 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 Global Health 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 Global Health i.e., Global Health and Commonwealth Bank go up and down completely randomly.
Pair Corralation between Global Health and Commonwealth Bank
Assuming the 90 days trading horizon Global Health is expected to generate 8.73 times less return on investment than Commonwealth Bank. In addition to that, Global Health is 2.57 times more volatile than Commonwealth Bank. It trades about 0.02 of its total potential returns per unit of risk. Commonwealth Bank is currently generating about 0.35 per unit of volatility. If you would invest 14,435 in Commonwealth Bank on September 3, 2024 and sell it today you would earn a total of 1,423 from holding Commonwealth Bank or generate 9.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Global Health vs. Commonwealth Bank
Performance |
| Timeline |
| Global Health |
| Commonwealth Bank |
Global Health and Commonwealth Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global Health and Commonwealth Bank
The main advantage of trading using opposite Global Health and Commonwealth Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Health 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.| Global Health vs. TTG Fintech | Global Health vs. Land Homes Group | Global Health vs. Regis Healthcare | Global Health vs. Horseshoe Metals |
| Commonwealth Bank vs. Alternative Investment Trust | Commonwealth Bank vs. Ora Banda Mining | Commonwealth Bank vs. Argo Investments | Commonwealth Bank vs. Talisman Mining |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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