Correlation Between Commonwealth Bank and Change Financial
Can any of the company-specific risk be diversified away by investing in both Commonwealth Bank and Change Financial 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 Change Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Commonwealth Bank and Change Financial Limited, you can compare the effects of market volatilities on Commonwealth Bank and Change Financial 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 Change Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Commonwealth Bank and Change Financial.
Diversification Opportunities for Commonwealth Bank and Change Financial
-0.79 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Commonwealth and Change is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Commonwealth Bank and Change Financial Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Change Financial 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 are associated (or correlated) with Change Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Change Financial has no effect on the direction of Commonwealth Bank i.e., Commonwealth Bank and Change Financial go up and down completely randomly.
Pair Corralation between Commonwealth Bank and Change Financial
Assuming the 90 days trading horizon Commonwealth Bank is expected to generate 1.16 times less return on investment than Change Financial. But when comparing it to its historical volatility, Commonwealth Bank is 4.21 times less risky than Change Financial. It trades about 0.12 of its potential returns per unit of risk. Change Financial Limited is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 5.40 in Change Financial Limited on September 24, 2024 and sell it today you would earn a total of 0.60 from holding Change Financial Limited or generate 11.11% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Commonwealth Bank vs. Change Financial Limited
Performance |
Timeline |
Commonwealth Bank |
Change Financial |
Commonwealth Bank and Change Financial Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Commonwealth Bank and Change Financial
The main advantage of trading using opposite Commonwealth Bank and Change Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Commonwealth Bank position performs unexpectedly, Change Financial 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 Change Financial will offset losses from the drop in Change Financial's long position.Commonwealth Bank vs. Global Health | Commonwealth Bank vs. Fisher Paykel Healthcare | Commonwealth Bank vs. BTC Health Limited | Commonwealth Bank vs. Microequities Asset Management |
Change Financial vs. Audio Pixels Holdings | Change Financial vs. Norwest Minerals | Change Financial vs. Lindian Resources | Change Financial vs. Resource Base |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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