Correlation Between Commonwealth Bank and Corpay

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

Diversification Opportunities for Commonwealth Bank and Corpay

0.77

Correlation Coefficient

Commonwealth Bank  Corpay

Poor diversification

The 3 months correlation between Commonwealth and Corpay is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Commonwealth Bank of and Corpay Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Corpay Inc 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 Corpay. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Corpay Inc has no effect on the direction of Commonwealth Bank i.e., Commonwealth Bank and Corpay go up and down completely randomly.

Pair Corralation between Commonwealth Bank and Corpay

Assuming the 90 days horizon Commonwealth Bank of is expected to generate 1.17 times more return on investment than Corpay. However, Commonwealth Bank is 1.17 times more volatile than Corpay Inc. It trades about -0.17 of its potential returns per unit of risk. Corpay Inc is currently generating about -0.36 per unit of risk. If you would invest  10,238  in Commonwealth Bank of on September 28, 2024 and sell it today you would lose (532.00) from holding Commonwealth Bank of or give up 5.2% of portfolio value over 90 days.

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

Commonwealth Bank of  vs.  Corpay Inc

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. 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.

Corpay Inc

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Corpay Inc are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Corpay may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Commonwealth Bank and Corpay

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

The idea behind Commonwealth Bank of and Corpay Inc 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.

Check out your portfolio center.

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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.