Correlation Between Commonwealth Bank and Able View

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

Diversification Opportunities for Commonwealth Bank and Able View

-0.11

Correlation Coefficient

Commonwealth Bank  Able View

Good diversification

The 3 months correlation between Commonwealth and Able is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Commonwealth Bank of and Able View Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Able View Global 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 Able View. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Able View Global has no effect on the direction of Commonwealth Bank i.e., Commonwealth Bank and Able View go up and down completely randomly.

Pair Corralation between Commonwealth Bank and Able View

Assuming the 90 days horizon Commonwealth Bank of is expected to under-perform the Able View. But the pink sheet apears to be less risky and, when comparing its historical volatility, Commonwealth Bank of is 26.72 times less risky than Able View. The pink sheet trades about -0.04 of its potential returns per unit of risk. The Able View Global is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  1.20  in Able View Global on December 22, 2024 and sell it today you would earn a total of  1.00  from holding Able View Global or generate 83.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	51.67%
Values	Daily Returns

Commonwealth Bank of  vs.  Able View Global

Commonwealth Bank

Risk-Adjusted Performance

Very Weak

Over the last 90 days Commonwealth Bank of has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly 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.

Able View Global

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Able View Global are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Able View showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Commonwealth Bank and Able View

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

The idea behind Commonwealth Bank of and Able View Global 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 Search module to search for actively traded equities including funds and ETFs from over 30 global markets.