Correlation Between Commonwealth Bank and Park National

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

Diversification Opportunities for Commonwealth Bank and Park National

0.48

Correlation Coefficient

Commonwealth Bank  Park National

Very weak diversification

The 3 months correlation between Commonwealth and Park is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Commonwealth Bank of and Park National in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Park National 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 Park National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Park National has no effect on the direction of Commonwealth Bank i.e., Commonwealth Bank and Park National go up and down completely randomly.

Pair Corralation between Commonwealth Bank and Park National

Assuming the 90 days horizon Commonwealth Bank of is expected to generate 1.01 times more return on investment than Park National. However, Commonwealth Bank is 1.01 times more volatile than Park National. It trades about -0.04 of its potential returns per unit of risk. Park National is currently generating about -0.14 per unit of risk. If you would invest  9,530  in Commonwealth Bank of on December 21, 2024 and sell it today you would lose (357.00) from holding Commonwealth Bank of or give up 3.75% of portfolio value over 90 days.

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

Commonwealth Bank of  vs.  Park National

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.

Park National

Risk-Adjusted Performance

Very Weak

Over the last 90 days Park National has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Commonwealth Bank and Park National

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

The idea behind Commonwealth Bank of and Park National 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.