Correlation Between Commonwealth Bank and Bendigo

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

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

Diversification Opportunities for Commonwealth Bank and Bendigo

0.45

Correlation Coefficient

Commonwealth Bank  Bendigo

Very weak diversification

The 3 months correlation between Commonwealth and Bendigo is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Commonwealth Bank of and Bendigo And Adelaide in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bendigo And Adelaide 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 of are associated (or correlated) with Bendigo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bendigo And Adelaide has no effect on the direction of Commonwealth Bank i.e., Commonwealth Bank and Bendigo go up and down completely randomly.

Pair Corralation between Commonwealth Bank and Bendigo

Assuming the 90 days trading horizon Commonwealth Bank is expected to generate 20.27 times less return on investment than Bendigo. But when comparing it to its historical volatility, Commonwealth Bank of is 2.39 times less risky than Bendigo. It trades about 0.02 of its potential returns per unit of risk. Bendigo And Adelaide is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  1,179  in Bendigo And Adelaide on September 4, 2024 and sell it today you would earn a total of  159.00  from holding Bendigo And Adelaide or generate 13.49% return on investment over 90 days.

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

Commonwealth Bank of  vs.  Bendigo And Adelaide

Commonwealth Bank

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Commonwealth Bank of are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Commonwealth Bank is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Bendigo And Adelaide

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bendigo And Adelaide are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Bendigo unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Commonwealth Bank and Bendigo

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

The idea behind Commonwealth Bank of and Bendigo And Adelaide 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.