Correlation Between Liberty Financial and Commonwealth Bank
Can any of the company-specific risk be diversified away by investing in both Liberty Financial 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 Liberty Financial and Commonwealth Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Liberty Financial Group and Commonwealth Bank, you can compare the effects of market volatilities on Liberty Financial 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 Liberty Financial with a short position of Commonwealth Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Liberty Financial and Commonwealth Bank.
Diversification Opportunities for Liberty Financial and Commonwealth Bank
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Liberty and Commonwealth is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Liberty Financial Group and Commonwealth Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commonwealth Bank and Liberty Financial 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 Liberty Financial Group 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 Liberty Financial i.e., Liberty Financial and Commonwealth Bank go up and down completely randomly.
Pair Corralation between Liberty Financial and Commonwealth Bank
Assuming the 90 days trading horizon Liberty Financial Group is expected to generate 1.78 times more return on investment than Commonwealth Bank. However, Liberty Financial is 1.78 times more volatile than Commonwealth Bank. It trades about 0.47 of its potential returns per unit of risk. Commonwealth Bank is currently generating about 0.15 per unit of risk. If you would invest 329.00 in Liberty Financial Group on November 4, 2024 and sell it today you would earn a total of 69.00 from holding Liberty Financial Group or generate 20.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Liberty Financial Group vs. Commonwealth Bank
Performance |
| Timeline |
| Liberty Financial |
| Commonwealth Bank |
Liberty Financial and Commonwealth Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Liberty Financial and Commonwealth Bank
The main advantage of trading using opposite Liberty Financial and Commonwealth Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Liberty Financial 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.| Liberty Financial vs. BKI Investment | Liberty Financial vs. Argo Investments | Liberty Financial vs. Carnegie Clean Energy | Liberty Financial vs. Clime Investment Management |
| Commonwealth Bank vs. Galena Mining | Commonwealth Bank vs. Platinum Asset Management | Commonwealth Bank vs. Metro Mining | Commonwealth Bank vs. Super Retail Group |
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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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