Correlation Between Commonwealth Bank and American Business

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

Diversification Opportunities for Commonwealth Bank and American Business

0.0

Correlation Coefficient

Commonwealth Bank  American Business

Pay attention - limited upside

The 3 months correlation between Commonwealth and American is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Commonwealth Bank of and American Business Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Business Corp 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 American Business. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Business Corp has no effect on the direction of Commonwealth Bank i.e., Commonwealth Bank and American Business go up and down completely randomly.

Pair Corralation between Commonwealth Bank and American Business

If you would invest  0.01  in American Business Corp on December 29, 2024 and sell it today you would earn a total of  0.00  from holding American Business Corp or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	95.31%
Values	Daily Returns

Commonwealth Bank of  vs.  American Business Corp

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.

American Business Corp

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Commonwealth Bank and American Business

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

The idea behind Commonwealth Bank of and American Business Corp 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.