Correlation Between Commonwealth Bank and Pinterest

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

Diversification Opportunities for Commonwealth Bank and Pinterest

-0.46

Correlation Coefficient

Commonwealth Bank  Pinterest

Very good diversification

The 3 months correlation between Commonwealth and Pinterest is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Commonwealth Bank of and Pinterest in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pinterest 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 Pinterest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pinterest has no effect on the direction of Commonwealth Bank i.e., Commonwealth Bank and Pinterest go up and down completely randomly.

Pair Corralation between Commonwealth Bank and Pinterest

Assuming the 90 days horizon Commonwealth Bank of is expected to under-perform the Pinterest. But the pink sheet apears to be less risky and, when comparing its historical volatility, Commonwealth Bank of is 1.7 times less risky than Pinterest. The pink sheet trades about -0.2 of its potential returns per unit of risk. The Pinterest is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  3,306  in Pinterest on October 10, 2024 and sell it today you would lose (125.00) from holding Pinterest or give up 3.78% of portfolio value over 90 days.

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

Commonwealth Bank of  vs.  Pinterest

Commonwealth Bank

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Commonwealth Bank of are ranked lower than 5 (%) 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.

Pinterest

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Commonwealth Bank and Pinterest

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

The idea behind Commonwealth Bank of and Pinterest 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..