Correlation Between Commonwealth Bank and Prologis

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

Diversification Opportunities for Commonwealth Bank and Prologis

-0.25

Correlation Coefficient

Commonwealth Bank  Prologis

Very good diversification

The 3 months correlation between Commonwealth and Prologis is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Commonwealth Bank of and Prologis in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prologis 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 Prologis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prologis has no effect on the direction of Commonwealth Bank i.e., Commonwealth Bank and Prologis go up and down completely randomly.

Pair Corralation between Commonwealth Bank and Prologis

Assuming the 90 days horizon Commonwealth Bank of is expected to generate 0.9 times more return on investment than Prologis. However, Commonwealth Bank of is 1.11 times less risky than Prologis. It trades about 0.1 of its potential returns per unit of risk. Prologis is currently generating about 0.01 per unit of risk. If you would invest  9,256  in Commonwealth Bank of on September 13, 2024 and sell it today you would earn a total of  245.00  from holding Commonwealth Bank of or generate 2.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.65%
Values	Daily Returns

Commonwealth Bank of  vs.  Prologis

Commonwealth Bank

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Commonwealth Bank of are ranked lower than 9 (%) 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.

Prologis

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prologis has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's forward-looking indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Commonwealth Bank and Prologis

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

The idea behind Commonwealth Bank of and Prologis 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.