Correlation Between Commonwealth Bank and ANZ Group

Can any of the company-specific risk be diversified away by investing in both Commonwealth Bank and ANZ Group 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 ANZ Group into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Commonwealth Bank of and ANZ Group Holdings, you can compare the effects of market volatilities on Commonwealth Bank and ANZ Group 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 ANZ Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Commonwealth Bank and ANZ Group.

Diversification Opportunities for Commonwealth Bank and ANZ Group

0.36

Correlation Coefficient

Commonwealth Bank  ANZ Group

Weak diversification

The 3 months correlation between Commonwealth and ANZ is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Commonwealth Bank of and ANZ Group Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ANZ Group Holdings 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 of are associated (or correlated) with ANZ Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ANZ Group Holdings has no effect on the direction of Commonwealth Bank i.e., Commonwealth Bank and ANZ Group go up and down completely randomly.

Pair Corralation between Commonwealth Bank and ANZ Group

Assuming the 90 days trading horizon Commonwealth Bank is expected to generate 1.37 times less return on investment than ANZ Group. In addition to that, Commonwealth Bank is 2.17 times more volatile than ANZ Group Holdings. It trades about 0.02 of its total potential returns per unit of risk. ANZ Group Holdings is currently generating about 0.07 per unit of volatility. If you would invest  10,152  in ANZ Group Holdings on September 19, 2024 and sell it today you would earn a total of  103.00  from holding ANZ Group Holdings or generate 1.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Commonwealth Bank of  vs.  ANZ Group Holdings

Commonwealth Bank

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Commonwealth Bank of are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Commonwealth Bank is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

ANZ Group Holdings

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ANZ Group Holdings are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, ANZ Group is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Commonwealth Bank and ANZ Group

The main advantage of trading using opposite Commonwealth Bank and ANZ Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Commonwealth Bank position performs unexpectedly, ANZ Group 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 ANZ Group will offset losses from the drop in ANZ Group's long position.

The idea behind Commonwealth Bank of and ANZ Group Holdings pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.