Correlation Between Commonwealth Bank and ESSEX

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

Diversification Opportunities for Commonwealth Bank and ESSEX

-0.3

Correlation Coefficient

Commonwealth Bank  ESSEX

Very good diversification

The 3 months correlation between Commonwealth and ESSEX is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Commonwealth Bank of and ESSEX PORTFOLIO L in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ESSEX PORTFOLIO L 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 ESSEX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ESSEX PORTFOLIO L has no effect on the direction of Commonwealth Bank i.e., Commonwealth Bank and ESSEX go up and down completely randomly.

Pair Corralation between Commonwealth Bank and ESSEX

Assuming the 90 days horizon Commonwealth Bank of is expected to under-perform the ESSEX. In addition to that, Commonwealth Bank is 7.87 times more volatile than ESSEX PORTFOLIO L. It trades about -0.27 of its total potential returns per unit of risk. ESSEX PORTFOLIO L is currently generating about 0.16 per unit of volatility. If you would invest  9,761  in ESSEX PORTFOLIO L on September 25, 2024 and sell it today you would earn a total of  65.00  from holding ESSEX PORTFOLIO L or generate 0.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.0%
Values	Daily Returns

Commonwealth Bank of  vs.  ESSEX PORTFOLIO L

Commonwealth Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Commonwealth Bank of has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly 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.

ESSEX PORTFOLIO L

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ESSEX PORTFOLIO L has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, ESSEX is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Commonwealth Bank and ESSEX

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

The idea behind Commonwealth Bank of and ESSEX PORTFOLIO L 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.