Correlation Between Commonwealth Bank and Auswide Bank

Can any of the company-specific risk be diversified away by investing in both Commonwealth Bank and Auswide 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 Commonwealth Bank and Auswide Bank 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 Auswide Bank, you can compare the effects of market volatilities on Commonwealth Bank and Auswide 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 Commonwealth Bank with a short position of Auswide Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Commonwealth Bank and Auswide Bank.

Diversification Opportunities for Commonwealth Bank and Auswide Bank

0.06

Correlation Coefficient

Commonwealth Bank  Auswide Bank

Significant diversification

The 3 months correlation between Commonwealth and Auswide is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Commonwealth Bank of and Auswide Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Auswide Bank 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 Auswide Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Auswide Bank has no effect on the direction of Commonwealth Bank i.e., Commonwealth Bank and Auswide Bank go up and down completely randomly.

Pair Corralation between Commonwealth Bank and Auswide Bank

Assuming the 90 days trading horizon Commonwealth Bank is expected to generate 14.99 times less return on investment than Auswide Bank. But when comparing it to its historical volatility, Commonwealth Bank of is 7.25 times less risky than Auswide Bank. It trades about 0.07 of its potential returns per unit of risk. Auswide Bank is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  414.00  in Auswide Bank on September 28, 2024 and sell it today you would earn a total of  81.00  from holding Auswide Bank or generate 19.57% return on investment over 90 days.

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

Commonwealth Bank of  vs.  Auswide Bank

Commonwealth Bank

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Commonwealth Bank of are ranked lower than 5 (%) 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.

Auswide Bank

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Auswide Bank are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Auswide Bank unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Commonwealth Bank and Auswide Bank

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

The idea behind Commonwealth Bank of and Auswide Bank 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.