Correlation Between Commonwealth Bank and AMP

Can any of the company-specific risk be diversified away by investing in both Commonwealth Bank and AMP 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 AMP 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 AMP, you can compare the effects of market volatilities on Commonwealth Bank and AMP 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 AMP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Commonwealth Bank and AMP.

Diversification Opportunities for Commonwealth Bank and AMP

0.2

Correlation Coefficient

Commonwealth Bank  AMP

Modest diversification

The 3 months correlation between Commonwealth and AMP is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Commonwealth Bank of and AMP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AMP 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 AMP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AMP has no effect on the direction of Commonwealth Bank i.e., Commonwealth Bank and AMP go up and down completely randomly.

Pair Corralation between Commonwealth Bank and AMP

Assuming the 90 days trading horizon Commonwealth Bank of is expected to under-perform the AMP. But the preferred stock apears to be less risky and, when comparing its historical volatility, Commonwealth Bank of is 4.27 times less risky than AMP. The preferred stock trades about -0.01 of its potential returns per unit of risk. The AMP is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  143.00  in AMP on September 25, 2024 and sell it today you would earn a total of  19.00  from holding AMP or generate 13.29% return on investment over 90 days.

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

Commonwealth Bank of  vs.  AMP

Commonwealth Bank

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Commonwealth Bank of are ranked lower than 3 (%) 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 newest stock price disturbance, may contribute to short-term losses for the investors.

AMP

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AMP are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, AMP unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Commonwealth Bank and AMP

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

The idea behind Commonwealth Bank of and AMP 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.