Correlation Between Commonwealth Bank and BANKINTER ADR

Can any of the company-specific risk be diversified away by investing in both Commonwealth Bank and BANKINTER ADR 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 BANKINTER ADR 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 BANKINTER ADR 2007, you can compare the effects of market volatilities on Commonwealth Bank and BANKINTER ADR 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 BANKINTER ADR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Commonwealth Bank and BANKINTER ADR.

Diversification Opportunities for Commonwealth Bank and BANKINTER ADR

0.3

Correlation Coefficient

Commonwealth Bank  BANKINTER ADR

Weak diversification

The 3 months correlation between Commonwealth and BANKINTER is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Commonwealth Bank of and BANKINTER ADR 2007 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BANKINTER ADR 2007 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 BANKINTER ADR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BANKINTER ADR 2007 has no effect on the direction of Commonwealth Bank i.e., Commonwealth Bank and BANKINTER ADR go up and down completely randomly.

Pair Corralation between Commonwealth Bank and BANKINTER ADR

Assuming the 90 days horizon Commonwealth Bank is expected to generate 2.17 times less return on investment than BANKINTER ADR. But when comparing it to its historical volatility, Commonwealth Bank of is 1.4 times less risky than BANKINTER ADR. It trades about 0.13 of its potential returns per unit of risk. BANKINTER ADR 2007 is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  689.00  in BANKINTER ADR 2007 on September 12, 2024 and sell it today you would earn a total of  56.00  from holding BANKINTER ADR 2007 or generate 8.13% 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.  BANKINTER ADR 2007

Commonwealth Bank

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Commonwealth Bank of are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Commonwealth Bank may actually be approaching a critical reversion point that can send shares even higher in January 2025.

BANKINTER ADR 2007

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BANKINTER ADR 2007 are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, BANKINTER ADR is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Commonwealth Bank and BANKINTER ADR

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

The idea behind Commonwealth Bank of and BANKINTER ADR 2007 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.