Correlation Between Commonwealth Real and Six Circles

Can any of the company-specific risk be diversified away by investing in both Commonwealth Real and Six Circles 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 Real and Six Circles into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Commonwealth Real Estate and Six Circles International, you can compare the effects of market volatilities on Commonwealth Real and Six Circles 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 Real with a short position of Six Circles. Check out your portfolio center. Please also check ongoing floating volatility patterns of Commonwealth Real and Six Circles.

Diversification Opportunities for Commonwealth Real and Six Circles

-0.37

Correlation Coefficient

Commonwealth Real  Six Circles

Very good diversification

The 3 months correlation between Commonwealth and Six is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Commonwealth Real Estate and Six Circles International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Six Circles International and Commonwealth Real 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 Real Estate are associated (or correlated) with Six Circles. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Six Circles International has no effect on the direction of Commonwealth Real i.e., Commonwealth Real and Six Circles go up and down completely randomly.

Pair Corralation between Commonwealth Real and Six Circles

Assuming the 90 days horizon Commonwealth Real Estate is expected to under-perform the Six Circles. But the mutual fund apears to be less risky and, when comparing its historical volatility, Commonwealth Real Estate is 1.07 times less risky than Six Circles. The mutual fund trades about -0.07 of its potential returns per unit of risk. The Six Circles International is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  1,073  in Six Circles International on December 27, 2024 and sell it today you would earn a total of  117.00  from holding Six Circles International or generate 10.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Commonwealth Real Estate  vs.  Six Circles International

Commonwealth Real Estate

Risk-Adjusted Performance

Very Weak

Over the last 90 days Commonwealth Real Estate has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Commonwealth Real is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Six Circles International

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Six Circles International are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Six Circles may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Commonwealth Real and Six Circles

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

The idea behind Commonwealth Real Estate and Six Circles International 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.