Correlation Between Macquarie Group and Commonwealth Bank
Can any of the company-specific risk be diversified away by investing in both Macquarie Group 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 Macquarie Group and Commonwealth Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Macquarie Group Ltd and Commonwealth Bank of, you can compare the effects of market volatilities on Macquarie Group 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 Macquarie Group with a short position of Commonwealth Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Macquarie Group and Commonwealth Bank.
Diversification Opportunities for Macquarie Group and Commonwealth Bank
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Macquarie and Commonwealth is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Macquarie Group Ltd and Commonwealth Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commonwealth Bank and Macquarie Group 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 Macquarie Group Ltd 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 Macquarie Group i.e., Macquarie Group and Commonwealth Bank go up and down completely randomly.
Pair Corralation between Macquarie Group and Commonwealth Bank
Assuming the 90 days trading horizon Macquarie Group Ltd is expected to under-perform the Commonwealth Bank. But the preferred stock apears to be less risky and, when comparing its historical volatility, Macquarie Group Ltd is 1.13 times less risky than Commonwealth Bank. The preferred stock trades about -0.07 of its potential returns per unit of risk. The Commonwealth Bank of is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 10,408 in Commonwealth Bank of on November 4, 2024 and sell it today you would earn a total of 127.00 from holding Commonwealth Bank of or generate 1.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Macquarie Group Ltd vs. Commonwealth Bank of
Performance |
| Timeline |
| Macquarie Group |
| Commonwealth Bank |
Macquarie Group and Commonwealth Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Macquarie Group and Commonwealth Bank
The main advantage of trading using opposite Macquarie Group and Commonwealth Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Macquarie Group 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.| Macquarie Group vs. Spirit Telecom | Macquarie Group vs. Data3 | Macquarie Group vs. Saferoads Holdings | Macquarie Group vs. Retail Food Group |
| Commonwealth Bank vs. Vitura Health Limited | Commonwealth Bank vs. Sonic Healthcare | Commonwealth Bank vs. Oneview Healthcare PLC | Commonwealth Bank vs. Aurelia Metals |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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