Correlation Between Prime Financial and Commonwealth Bank
Can any of the company-specific risk be diversified away by investing in both Prime 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 Prime 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 Prime Financial Group and Commonwealth Bank of, you can compare the effects of market volatilities on Prime 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 Prime Financial with a short position of Commonwealth Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prime Financial and Commonwealth Bank.
Diversification Opportunities for Prime Financial and Commonwealth Bank
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Prime and Commonwealth is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Prime 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 Prime 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 Prime 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 Prime Financial i.e., Prime Financial and Commonwealth Bank go up and down completely randomly.
Pair Corralation between Prime Financial and Commonwealth Bank
Assuming the 90 days trading horizon Prime Financial Group is expected to under-perform the Commonwealth Bank. In addition to that, Prime Financial is 3.32 times more volatile than Commonwealth Bank of. It trades about -0.08 of its total potential returns per unit of risk. Commonwealth Bank of is currently generating about 0.02 per unit of volatility. If you would invest 10,321 in Commonwealth Bank of on September 1, 2024 and sell it today you would earn a total of 19.00 from holding Commonwealth Bank of or generate 0.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Prime Financial Group vs. Commonwealth Bank of
Performance |
| Timeline |
| Prime Financial Group |
| Commonwealth Bank |
Prime Financial and Commonwealth Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Prime Financial and Commonwealth Bank
The main advantage of trading using opposite Prime Financial and Commonwealth Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prime 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.| Prime Financial vs. WA1 Resources | Prime Financial vs. Predictive Discovery | Prime Financial vs. Cooper Metals | Prime Financial vs. OD6 Metals |
| Commonwealth Bank vs. Westpac Banking | Commonwealth Bank vs. Commonwealth Bank | Commonwealth Bank vs. Commonwealth Bank of | Commonwealth Bank vs. Commonwealth Bank of |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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