Correlation Between Commonwealth Bank and Origin Energy
Can any of the company-specific risk be diversified away by investing in both Commonwealth Bank and Origin Energy 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 Commonwealth Bank and Origin Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Commonwealth Bank and Origin Energy, you can compare the effects of market volatilities on Commonwealth Bank and Origin Energy 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 Commonwealth Bank with a short position of Origin Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Commonwealth Bank and Origin Energy.
Diversification Opportunities for Commonwealth Bank and Origin Energy
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Commonwealth and Origin is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Commonwealth Bank and Origin Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Origin Energy and Commonwealth Bank 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 Commonwealth Bank are associated (or correlated) with Origin Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Origin Energy has no effect on the direction of Commonwealth Bank i.e., Commonwealth Bank and Origin Energy go up and down completely randomly.
Pair Corralation between Commonwealth Bank and Origin Energy
Assuming the 90 days trading horizon Commonwealth Bank is expected to generate 0.82 times more return on investment than Origin Energy. However, Commonwealth Bank is 1.21 times less risky than Origin Energy. It trades about 0.1 of its potential returns per unit of risk. Origin Energy is currently generating about 0.08 per unit of risk. If you would invest 9,528 in Commonwealth Bank on September 26, 2024 and sell it today you would earn a total of 5,984 from holding Commonwealth Bank or generate 62.8% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 99.8% |
Values | Daily Returns |
Commonwealth Bank vs. Origin Energy
Performance |
Timeline |
Commonwealth Bank |
Origin Energy |
Commonwealth Bank and Origin Energy Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Commonwealth Bank and Origin Energy
The main advantage of trading using opposite Commonwealth Bank and Origin Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Commonwealth Bank position performs unexpectedly, Origin Energy 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 Origin Energy will offset losses from the drop in Origin Energy's long position.Commonwealth Bank vs. Westpac Banking | Commonwealth Bank vs. Advanced Braking Technology | Commonwealth Bank vs. Ras Technology Holdings | Commonwealth Bank vs. Collins Foods |
Origin Energy vs. ARN Media Limited | Origin Energy vs. Hotel Property Investments | Origin Energy vs. Step One Clothing | Origin Energy vs. Zoom2u 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 Anywhere module to track or share privately all of your investments from the convenience of any device.
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