Correlation Between Commonwealth Australia/new and Commonwealth Japan

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

By analyzing existing cross correlation between Commonwealth Australianew Zealand and Commonwealth Japan Fund, you can compare the effects of market volatilities on Commonwealth Australia/new and Commonwealth Japan 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 Australia/new with a short position of Commonwealth Japan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Commonwealth Australia/new and Commonwealth Japan.

Diversification Opportunities for Commonwealth Australia/new and Commonwealth Japan

0.72

Correlation Coefficient

Commonwealth Australia/new  Commonwealth Japan

Poor diversification

The 3 months correlation between Commonwealth and Commonwealth is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Commonwealth Australianew Zeal and Commonwealth Japan Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commonwealth Japan and Commonwealth Australia/new 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 Australianew Zealand are associated (or correlated) with Commonwealth Japan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Commonwealth Japan has no effect on the direction of Commonwealth Australia/new i.e., Commonwealth Australia/new and Commonwealth Japan go up and down completely randomly.

Pair Corralation between Commonwealth Australia/new and Commonwealth Japan

Assuming the 90 days horizon Commonwealth Australianew Zealand is expected to under-perform the Commonwealth Japan. But the mutual fund apears to be less risky and, when comparing its historical volatility, Commonwealth Australianew Zealand is 1.22 times less risky than Commonwealth Japan. The mutual fund trades about -0.11 of its potential returns per unit of risk. The Commonwealth Japan Fund is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  386.00  in Commonwealth Japan Fund on November 28, 2024 and sell it today you would lose (5.00) from holding Commonwealth Japan Fund or give up 1.3% of portfolio value over 90 days.

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

Commonwealth Australianew Zeal  vs.  Commonwealth Japan Fund

Commonwealth Australia/new

Risk-Adjusted Performance

Very Weak

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

Commonwealth Japan

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Commonwealth Australia/new and Commonwealth Japan

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

The idea behind Commonwealth Australianew Zealand and Commonwealth Japan Fund 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.