Correlation Between Commonwealth Bank and Papaya Growth

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

Diversification Opportunities for Commonwealth Bank and Papaya Growth

0.03

Correlation Coefficient

Commonwealth Bank  Papaya Growth

Significant diversification

The 3 months correlation between Commonwealth and Papaya is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Commonwealth Bank of and Papaya Growth Opportunity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Papaya Growth Opportunity 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 Papaya Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Papaya Growth Opportunity has no effect on the direction of Commonwealth Bank i.e., Commonwealth Bank and Papaya Growth go up and down completely randomly.

Pair Corralation between Commonwealth Bank and Papaya Growth

Assuming the 90 days horizon Commonwealth Bank of is expected to generate 6.0 times more return on investment than Papaya Growth. However, Commonwealth Bank is 6.0 times more volatile than Papaya Growth Opportunity. It trades about 0.05 of its potential returns per unit of risk. Papaya Growth Opportunity is currently generating about 0.15 per unit of risk. If you would invest  9,526  in Commonwealth Bank of on September 21, 2024 and sell it today you would earn a total of  249.00  from holding Commonwealth Bank of or generate 2.61% return on investment over 90 days.

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

Commonwealth Bank of  vs.  Papaya Growth Opportunity

Commonwealth Bank

Risk-Adjusted Performance

0 of 100

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.

Papaya Growth Opportunity

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Papaya Growth Opportunity are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Papaya Growth is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Commonwealth Bank and Papaya Growth

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

The idea behind Commonwealth Bank of and Papaya Growth Opportunity 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 CEOs Directory module to screen CEOs from public companies around the world.