Correlation Between Bell Financial and Commonwealth Bank

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

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

Diversification Opportunities for Bell Financial and Commonwealth Bank

0.43

Correlation Coefficient

Bell Financial  Commonwealth Bank

Very weak diversification

The 3 months correlation between Bell and Commonwealth is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Bell Financial Group and Commonwealth Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commonwealth Bank and Bell Financial 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 Bell Financial Group 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 Bell Financial i.e., Bell Financial and Commonwealth Bank go up and down completely randomly.

Pair Corralation between Bell Financial and Commonwealth Bank

Assuming the 90 days trading horizon Bell Financial Group is expected to generate 0.57 times more return on investment than Commonwealth Bank. However, Bell Financial Group is 1.76 times less risky than Commonwealth Bank. It trades about 0.15 of its potential returns per unit of risk. Commonwealth Bank is currently generating about 0.05 per unit of risk. If you would invest  131.00  in Bell Financial Group on October 11, 2024 and sell it today you would earn a total of  3.00  from holding Bell Financial Group or generate 2.29% return on investment over 90 days.

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

Bell Financial Group  vs.  Commonwealth Bank

Bell Financial Group

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bell Financial Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Bell Financial is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Commonwealth Bank

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Commonwealth Bank are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Commonwealth Bank unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bell Financial and Commonwealth Bank

The main advantage of trading using opposite Bell Financial and Commonwealth Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bell Financial 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 Bell Financial Group and Commonwealth Bank 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..