Correlation Between Commonwealth Bank and Bell Financial

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

Diversification Opportunities for Commonwealth Bank and Bell Financial

-0.45

Correlation Coefficient

Commonwealth Bank  Bell Financial

Very good diversification

The 3 months correlation between Commonwealth and Bell is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Commonwealth Bank of and Bell Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bell Financial Group 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 Bell Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bell Financial Group has no effect on the direction of Commonwealth Bank i.e., Commonwealth Bank and Bell Financial go up and down completely randomly.

Pair Corralation between Commonwealth Bank and Bell Financial

Assuming the 90 days trading horizon Commonwealth Bank of is expected to under-perform the Bell Financial. But the stock apears to be less risky and, when comparing its historical volatility, Commonwealth Bank of is 5.78 times less risky than Bell Financial. The stock trades about -0.03 of its potential returns per unit of risk. The Bell Financial Group is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  130.00  in Bell Financial Group on September 26, 2024 and sell it today you would earn a total of  3.00  from holding Bell Financial Group or generate 2.31% return on investment over 90 days.

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

Commonwealth Bank of  vs.  Bell Financial Group

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.

Bell Financial Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bell Financial Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Bell Financial is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Commonwealth Bank and Bell Financial

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

The idea behind Commonwealth Bank of and Bell Financial Group 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.