Correlation Between Magellan Financial and Commonwealth Bank
Can any of the company-specific risk be diversified away by investing in both Magellan 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 Magellan 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 Magellan Financial Group and Commonwealth Bank, you can compare the effects of market volatilities on Magellan 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 Magellan Financial with a short position of Commonwealth Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Magellan Financial and Commonwealth Bank.
Diversification Opportunities for Magellan Financial and Commonwealth Bank
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Magellan and Commonwealth is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Magellan 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 Magellan 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 Magellan 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 Magellan Financial i.e., Magellan Financial and Commonwealth Bank go up and down completely randomly.
Pair Corralation between Magellan Financial and Commonwealth Bank
Assuming the 90 days trading horizon Magellan Financial Group is expected to under-perform the Commonwealth Bank. But the stock apears to be less risky and, when comparing its historical volatility, Magellan Financial Group is 1.1 times less risky than Commonwealth Bank. The stock trades about -0.09 of its potential returns per unit of risk. The Commonwealth Bank is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 15,752 in Commonwealth Bank on October 12, 2024 and sell it today you would earn a total of 127.00 from holding Commonwealth Bank or generate 0.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Magellan Financial Group vs. Commonwealth Bank
Performance |
| Timeline |
| Magellan Financial |
| Commonwealth Bank |
Magellan Financial and Commonwealth Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Magellan Financial and Commonwealth Bank
The main advantage of trading using opposite Magellan Financial and Commonwealth Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Magellan 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.| Magellan Financial vs. Credit Clear | Magellan Financial vs. ARN Media Limited | Magellan Financial vs. Commonwealth Bank of | Magellan Financial vs. Kkr Credit Income |
| Commonwealth Bank vs. Hutchison Telecommunications | Commonwealth Bank vs. Medibank Private | Commonwealth Bank vs. ARN Media Limited | Commonwealth Bank vs. Magellan Financial 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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