Correlation Between X2M Connect and Commonwealth Bank
Can any of the company-specific risk be diversified away by investing in both X2M Connect 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 X2M Connect and Commonwealth Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between X2M Connect and Commonwealth Bank, you can compare the effects of market volatilities on X2M Connect 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 X2M Connect with a short position of Commonwealth Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of X2M Connect and Commonwealth Bank.
Diversification Opportunities for X2M Connect and Commonwealth Bank
-0.66 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between X2M and Commonwealth is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding X2M Connect and Commonwealth Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commonwealth Bank and X2M Connect 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 X2M Connect 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 X2M Connect i.e., X2M Connect and Commonwealth Bank go up and down completely randomly.
Pair Corralation between X2M Connect and Commonwealth Bank
Assuming the 90 days trading horizon X2M Connect is expected to under-perform the Commonwealth Bank. In addition to that, X2M Connect is 1.34 times more volatile than Commonwealth Bank. It trades about -0.12 of its total potential returns per unit of risk. Commonwealth Bank is currently generating about 0.14 per unit of volatility. If you would invest 14,177 in Commonwealth Bank on September 2, 2024 and sell it today you would earn a total of 1,681 from holding Commonwealth Bank or generate 11.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
X2M Connect vs. Commonwealth Bank
Performance |
| Timeline |
| X2M Connect |
| Commonwealth Bank |
X2M Connect and Commonwealth Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with X2M Connect and Commonwealth Bank
The main advantage of trading using opposite X2M Connect and Commonwealth Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if X2M Connect 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.| X2M Connect vs. Aneka Tambang Tbk | X2M Connect vs. Commonwealth Bank | X2M Connect vs. Commonwealth Bank of | X2M Connect vs. Australia and New |
| Commonwealth Bank vs. Macquarie Group | Commonwealth Bank vs. Rio Tinto | Commonwealth Bank vs. CSL | 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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