Correlation Between CapitaLand Investment and Commonwealth Bank

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

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

Diversification Opportunities for CapitaLand Investment and Commonwealth Bank

-0.78

Correlation Coefficient

CapitaLand Investment  Commonwealth Bank

Pay attention - limited upside

The 3 months correlation between CapitaLand and Commonwealth is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding CapitaLand Investment Limited and Commonwealth Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commonwealth Bank and CapitaLand Investment 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 CapitaLand Investment Limited 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 CapitaLand Investment i.e., CapitaLand Investment and Commonwealth Bank go up and down completely randomly.

Pair Corralation between CapitaLand Investment and Commonwealth Bank

Assuming the 90 days horizon CapitaLand Investment is expected to generate 300.4 times less return on investment than Commonwealth Bank. In addition to that, CapitaLand Investment is 1.08 times more volatile than Commonwealth Bank of. It trades about 0.0 of its total potential returns per unit of risk. Commonwealth Bank of is currently generating about 0.11 per unit of volatility. If you would invest  6,462  in Commonwealth Bank of on October 6, 2024 and sell it today you would earn a total of  2,717  from holding Commonwealth Bank of or generate 42.05% return on investment over 90 days.

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

CapitaLand Investment Limited  vs.  Commonwealth Bank of

CapitaLand Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CapitaLand Investment Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

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 February 2025.

Pair Trading with CapitaLand Investment and Commonwealth Bank

The main advantage of trading using opposite CapitaLand Investment and Commonwealth Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CapitaLand Investment 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 CapitaLand Investment Limited 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.