Correlation Between INFORMATION SVC and Commonwealth Bank

Can any of the company-specific risk be diversified away by investing in both INFORMATION SVC and Commonwealth Bank 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 INFORMATION SVC and Commonwealth Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between INFORMATION SVC GRP and Commonwealth Bank of, you can compare the effects of market volatilities on INFORMATION SVC and Commonwealth Bank 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 INFORMATION SVC with a short position of Commonwealth Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of INFORMATION SVC and Commonwealth Bank.

Diversification Opportunities for INFORMATION SVC and Commonwealth Bank

0.85

Correlation Coefficient

INFORMATION SVC  Commonwealth Bank

Very poor diversification

The 3 months correlation between INFORMATION and Commonwealth is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding INFORMATION SVC GRP and Commonwealth Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commonwealth Bank and INFORMATION SVC 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 INFORMATION SVC GRP are associated (or correlated) with Commonwealth Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Commonwealth Bank has no effect on the direction of INFORMATION SVC i.e., INFORMATION SVC and Commonwealth Bank go up and down completely randomly.

Pair Corralation between INFORMATION SVC and Commonwealth Bank

Assuming the 90 days horizon INFORMATION SVC GRP is expected to under-perform the Commonwealth Bank. In addition to that, INFORMATION SVC is 1.41 times more volatile than Commonwealth Bank of. It trades about -0.18 of its total potential returns per unit of risk. Commonwealth Bank of is currently generating about -0.21 per unit of volatility. If you would invest  9,736  in Commonwealth Bank of on September 30, 2024 and sell it today you would lose (469.00) from holding Commonwealth Bank of or give up 4.82% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

INFORMATION SVC GRP  vs.  Commonwealth Bank of

INFORMATION SVC GRP

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in INFORMATION SVC GRP are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, INFORMATION SVC may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Commonwealth Bank

Risk-Adjusted Performance

10 of 100

OK

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 uncertain basic indicators, Commonwealth Bank may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with INFORMATION SVC and Commonwealth Bank

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

The idea behind INFORMATION SVC GRP and Commonwealth Bank of 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 Stocks Directory module to find actively traded stocks across global markets.