Correlation Between Bank Negara and Commonwealth Bank
Can any of the company-specific risk be diversified away by investing in both Bank Negara 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 Bank Negara and Commonwealth Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bank Negara Indonesia and Commonwealth Bank of, you can compare the effects of market volatilities on Bank Negara 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 Bank Negara with a short position of Commonwealth Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank Negara and Commonwealth Bank.
Diversification Opportunities for Bank Negara and Commonwealth Bank
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Bank and Commonwealth is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Bank Negara Indonesia and Commonwealth Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commonwealth Bank and Bank Negara 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 Bank Negara Indonesia 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 Bank Negara i.e., Bank Negara and Commonwealth Bank go up and down completely randomly.
Pair Corralation between Bank Negara and Commonwealth Bank
Assuming the 90 days horizon Bank Negara Indonesia is expected to generate 4.26 times more return on investment than Commonwealth Bank. However, Bank Negara is 4.26 times more volatile than Commonwealth Bank of. It trades about 0.03 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 1,401 in Bank Negara Indonesia on September 5, 2024 and sell it today you would earn a total of 1.00 from holding Bank Negara Indonesia or generate 0.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
Bank Negara Indonesia vs. Commonwealth Bank of
Performance |
| Timeline |
| Bank Negara Indonesia |
| Commonwealth Bank |
Bank Negara and Commonwealth Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank Negara and Commonwealth Bank
The main advantage of trading using opposite Bank Negara and Commonwealth Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank Negara 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.| Bank Negara vs. Banco Bradesco SA | Bank Negara vs. Itau Unibanco Banco | Bank Negara vs. Lloyds Banking Group | Bank Negara vs. Deutsche Bank AG |
| Commonwealth Bank vs. Svenska Handelsbanken PK | Commonwealth Bank vs. ANZ Group Holdings | Commonwealth Bank vs. Westpac Banking | Commonwealth Bank vs. National Australia Bank |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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