Correlation Between Step One and Commonwealth Bank
Can any of the company-specific risk be diversified away by investing in both Step One 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 Step One and Commonwealth Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Step One Clothing and Commonwealth Bank, you can compare the effects of market volatilities on Step One 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 Step One with a short position of Commonwealth Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Step One and Commonwealth Bank.
Diversification Opportunities for Step One and Commonwealth Bank
-0.79 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Step and Commonwealth is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Step One Clothing and Commonwealth Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commonwealth Bank and Step One 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 Step One Clothing 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 Step One i.e., Step One and Commonwealth Bank go up and down completely randomly.
Pair Corralation between Step One and Commonwealth Bank
Assuming the 90 days trading horizon Step One Clothing is expected to under-perform the Commonwealth Bank. In addition to that, Step One is 2.11 times more volatile than Commonwealth Bank. It trades about -0.09 of its total potential returns per unit of risk. Commonwealth Bank is currently generating about 0.33 per unit of volatility. If you would invest 14,286 in Commonwealth Bank on August 29, 2024 and sell it today you would earn a total of 1,471 from holding Commonwealth Bank or generate 10.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Step One Clothing vs. Commonwealth Bank
Performance |
| Timeline |
| Step One Clothing |
| Commonwealth Bank |
Step One and Commonwealth Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Step One and Commonwealth Bank
The main advantage of trading using opposite Step One and Commonwealth Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Step One 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.| Step One vs. Genetic Technologies | Step One vs. Fisher Paykel Healthcare | Step One vs. BTC Health Limited | Step One vs. Advanced Braking Technology |
| Commonwealth Bank vs. Dexus Convenience Retail | Commonwealth Bank vs. Computershare | Commonwealth Bank vs. Regal Investment | Commonwealth Bank vs. Carawine Resources Limited |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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