Correlation Between Retail Food and Commonwealth Bank
Can any of the company-specific risk be diversified away by investing in both Retail Food 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 Retail Food and Commonwealth Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Retail Food Group and Commonwealth Bank, you can compare the effects of market volatilities on Retail Food 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 Retail Food with a short position of Commonwealth Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Retail Food and Commonwealth Bank.
Diversification Opportunities for Retail Food and Commonwealth Bank
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Retail and Commonwealth is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Retail Food Group and Commonwealth Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commonwealth Bank and Retail Food 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 Retail Food 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 Retail Food i.e., Retail Food and Commonwealth Bank go up and down completely randomly.
Pair Corralation between Retail Food and Commonwealth Bank
Assuming the 90 days trading horizon Retail Food is expected to generate 2.5 times less return on investment than Commonwealth Bank. In addition to that, Retail Food is 3.09 times more volatile than Commonwealth Bank. It trades about 0.01 of its total potential returns per unit of risk. Commonwealth Bank is currently generating about 0.1 per unit of volatility. If you would invest 9,667 in Commonwealth Bank on September 13, 2024 and sell it today you would earn a total of 6,085 from holding Commonwealth Bank or generate 62.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Retail Food Group vs. Commonwealth Bank
Performance |
| Timeline |
| Retail Food Group |
| Commonwealth Bank |
Retail Food and Commonwealth Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Retail Food and Commonwealth Bank
The main advantage of trading using opposite Retail Food and Commonwealth Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Retail Food 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.| Retail Food vs. My Foodie Box | Retail Food vs. Queste Communications | Retail Food vs. Clime Investment Management | Retail Food vs. Regal Funds Management |
| Commonwealth Bank vs. Autosports Group | Commonwealth Bank vs. Richmond Vanadium Technology | Commonwealth Bank vs. Retail Food Group | Commonwealth Bank vs. Mach7 Technologies |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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