Correlation Between Commonwealth Bank and Joint Stock

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

Diversification Opportunities for Commonwealth Bank and Joint Stock

0.0

Correlation Coefficient

Commonwealth Bank  Joint Stock

Pay attention - limited upside

The 3 months correlation between Commonwealth and Joint is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Commonwealth Bank of and Joint Stock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Joint Stock 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 Joint Stock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Joint Stock has no effect on the direction of Commonwealth Bank i.e., Commonwealth Bank and Joint Stock go up and down completely randomly.

Pair Corralation between Commonwealth Bank and Joint Stock

Assuming the 90 days horizon Commonwealth Bank of is expected to generate 0.4 times more return on investment than Joint Stock. However, Commonwealth Bank of is 2.5 times less risky than Joint Stock. It trades about 0.11 of its potential returns per unit of risk. Joint Stock is currently generating about -0.06 per unit of risk. If you would invest  9,480  in Commonwealth Bank of on September 2, 2024 and sell it today you would earn a total of  860.00  from holding Commonwealth Bank of or generate 9.07% return on investment over 90 days.

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

Commonwealth Bank of  vs.  Joint Stock

Commonwealth Bank

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Commonwealth Bank of are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Commonwealth Bank may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Joint Stock

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Joint Stock has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Commonwealth Bank and Joint Stock

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

The idea behind Commonwealth Bank of and Joint Stock 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.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.