Correlation Between Six Circles and Commonwealth Real

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

By analyzing existing cross correlation between Six Circles International and Commonwealth Real Estate, you can compare the effects of market volatilities on Six Circles and Commonwealth Real 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 Six Circles with a short position of Commonwealth Real. Check out your portfolio center. Please also check ongoing floating volatility patterns of Six Circles and Commonwealth Real.

Diversification Opportunities for Six Circles and Commonwealth Real

-0.35

Correlation Coefficient

Six Circles  Commonwealth Real

Very good diversification

The 3 months correlation between Six and Commonwealth is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Six Circles International and Commonwealth Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commonwealth Real Estate and Six Circles 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 Six Circles International are associated (or correlated) with Commonwealth Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Commonwealth Real Estate has no effect on the direction of Six Circles i.e., Six Circles and Commonwealth Real go up and down completely randomly.

Pair Corralation between Six Circles and Commonwealth Real

Assuming the 90 days horizon Six Circles International is expected to generate 1.07 times more return on investment than Commonwealth Real. However, Six Circles is 1.07 times more volatile than Commonwealth Real Estate. It trades about 0.18 of its potential returns per unit of risk. Commonwealth Real Estate is currently generating about -0.08 per unit of risk. If you would invest  1,067  in Six Circles International on December 30, 2024 and sell it today you would earn a total of  116.00  from holding Six Circles International or generate 10.87% return on investment over 90 days.

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

Six Circles International  vs.  Commonwealth Real Estate

Six Circles International

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Six Circles International are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Six Circles may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Commonwealth Real Estate

Risk-Adjusted Performance

Very Weak

Over the last 90 days Commonwealth Real Estate has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Commonwealth Real is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Six Circles and Commonwealth Real

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

The idea behind Six Circles International and Commonwealth Real Estate 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.