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 of, 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
0.14 | Correlation Coefficient |
Average diversification
The 3 months correlation between Magellan and Commonwealth is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Magellan Financial Group and Commonwealth Bank of 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 generate 8.57 times more return on investment than Commonwealth Bank. However, Magellan Financial is 8.57 times more volatile than Commonwealth Bank of. It trades about 0.04 of its potential returns per unit of risk. Commonwealth Bank of is currently generating about 0.07 per unit of risk. If you would invest 783.00 in Magellan Financial Group on September 5, 2024 and sell it today you would earn a total of 344.00 from holding Magellan Financial Group or generate 43.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Magellan Financial Group vs. Commonwealth Bank of
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. Westpac Banking | Magellan Financial vs. Ecofibre | Magellan Financial vs. Adriatic Metals Plc | Magellan Financial vs. Australian Dairy Farms |
| Commonwealth Bank vs. Commonwealth Bank of | Commonwealth Bank vs. Ecofibre | Commonwealth Bank vs. iShares Global Healthcare | Commonwealth Bank vs. Australian Dairy Farms |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
Other Complementary Tools
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
| Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope | |
| Money Managers Screen money managers from public funds and ETFs managed around the world | |
| Companies Directory Evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals | |
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation |