Correlation Between COMMERCIAL BANK and E M

Can any of the company-specific risk be diversified away by investing in both COMMERCIAL BANK and E M 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 COMMERCIAL BANK and E M into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between COMMERCIAL BANK OF and E M L, you can compare the effects of market volatilities on COMMERCIAL BANK and E M 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 COMMERCIAL BANK with a short position of E M. Check out your portfolio center. Please also check ongoing floating volatility patterns of COMMERCIAL BANK and E M.

Diversification Opportunities for COMMERCIAL BANK and E M

0.62

Correlation Coefficient

COMMERCIAL BANK  E M

Poor diversification

The 3 months correlation between COMMERCIAL and EMLN0000 is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding COMMERCIAL BANK OF and E M L in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on E M L and COMMERCIAL 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 COMMERCIAL BANK OF are associated (or correlated) with E M. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of E M L has no effect on the direction of COMMERCIAL BANK i.e., COMMERCIAL BANK and E M go up and down completely randomly.

Pair Corralation between COMMERCIAL BANK and E M

Assuming the 90 days trading horizon COMMERCIAL BANK OF is expected to generate 0.33 times more return on investment than E M. However, COMMERCIAL BANK OF is 3.02 times less risky than E M. It trades about 0.38 of its potential returns per unit of risk. E M L is currently generating about 0.09 per unit of risk. If you would invest  7,470  in COMMERCIAL BANK OF on September 22, 2024 and sell it today you would earn a total of  2,980  from holding COMMERCIAL BANK OF or generate 39.89% return on investment over 90 days.

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

COMMERCIAL BANK OF  vs.  E M L

COMMERCIAL BANK

Risk-Adjusted Performance

29 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in COMMERCIAL BANK OF are ranked lower than 29 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, COMMERCIAL BANK sustained solid returns over the last few months and may actually be approaching a breakup point.

E M L

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in E M L are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, E M sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with COMMERCIAL BANK and E M

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

The idea behind COMMERCIAL BANK OF and E M L 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.