Correlation Between Steamships Trading and Commonwealth Bank
Can any of the company-specific risk be diversified away by investing in both Steamships Trading 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 Steamships Trading and Commonwealth Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Steamships Trading and Commonwealth Bank, you can compare the effects of market volatilities on Steamships Trading 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 Steamships Trading with a short position of Commonwealth Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steamships Trading and Commonwealth Bank.
Diversification Opportunities for Steamships Trading and Commonwealth Bank
-0.16 | Correlation Coefficient |
Good diversification
The 3 months correlation between Steamships and Commonwealth is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Steamships Trading and Commonwealth Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commonwealth Bank and Steamships Trading 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 Steamships Trading 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 Steamships Trading i.e., Steamships Trading and Commonwealth Bank go up and down completely randomly.
Pair Corralation between Steamships Trading and Commonwealth Bank
Assuming the 90 days trading horizon Steamships Trading is expected to generate 3.07 times less return on investment than Commonwealth Bank. But when comparing it to its historical volatility, Steamships Trading is 1.02 times less risky than Commonwealth Bank. It trades about 0.05 of its potential returns per unit of risk. Commonwealth Bank is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 10,309 in Commonwealth Bank on September 4, 2024 and sell it today you would earn a total of 5,469 from holding Commonwealth Bank or generate 53.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Steamships Trading vs. Commonwealth Bank
Performance |
| Timeline |
| Steamships Trading |
| Commonwealth Bank |
Steamships Trading and Commonwealth Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Steamships Trading and Commonwealth Bank
The main advantage of trading using opposite Steamships Trading and Commonwealth Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steamships Trading 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.| Steamships Trading vs. Aneka Tambang Tbk | Steamships Trading vs. ANZ Group Holdings | Steamships Trading vs. Australia and New | Steamships Trading vs. ANZ Group Holdings |
| Commonwealth Bank vs. Centaurus Metals | Commonwealth Bank vs. Pinnacle Investment Management | Commonwealth Bank vs. MFF Capital Investments | Commonwealth Bank vs. Steamships Trading |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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