Correlation Between Commonwealth Bank and Winsome Resources

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

By analyzing existing cross correlation between Commonwealth Bank and Winsome Resources, you can compare the effects of market volatilities on Commonwealth Bank and Winsome Resources 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 Winsome Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Commonwealth Bank and Winsome Resources.

Diversification Opportunities for Commonwealth Bank and Winsome Resources

-0.76

Correlation Coefficient

Commonwealth Bank  Winsome Resources

Pay attention - limited upside

The 3 months correlation between Commonwealth and Winsome is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Commonwealth Bank and Winsome Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Winsome Resources 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 Winsome Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Winsome Resources has no effect on the direction of Commonwealth Bank i.e., Commonwealth Bank and Winsome Resources go up and down completely randomly.

Pair Corralation between Commonwealth Bank and Winsome Resources

Assuming the 90 days trading horizon Commonwealth Bank is expected to generate 0.27 times more return on investment than Winsome Resources. However, Commonwealth Bank is 3.68 times less risky than Winsome Resources. It trades about 0.14 of its potential returns per unit of risk. Winsome Resources is currently generating about -0.02 per unit of risk. If you would invest  14,299  in Commonwealth Bank on September 16, 2024 and sell it today you would earn a total of  1,522  from holding Commonwealth Bank or generate 10.64% 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.  Winsome Resources

Commonwealth Bank

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Commonwealth Bank are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Commonwealth Bank may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Winsome Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Winsome Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Winsome Resources is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Commonwealth Bank and Winsome Resources

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

The idea behind Commonwealth Bank and Winsome Resources 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.