Correlation Between Charter Hall and Commonwealth Bank

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

By analyzing existing cross correlation between Charter Hall Retail and Commonwealth Bank of, you can compare the effects of market volatilities on Charter Hall and Commonwealth Bank 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 Charter Hall with a short position of Commonwealth Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Charter Hall and Commonwealth Bank.

Diversification Opportunities for Charter Hall and Commonwealth Bank

-0.31

Correlation Coefficient

Charter Hall  Commonwealth Bank

Very good diversification

The 3 months correlation between Charter and Commonwealth is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Charter Hall Retail and Commonwealth Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commonwealth Bank and Charter Hall 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 Charter Hall Retail are associated (or correlated) with Commonwealth Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Commonwealth Bank has no effect on the direction of Charter Hall i.e., Charter Hall and Commonwealth Bank go up and down completely randomly.

Pair Corralation between Charter Hall and Commonwealth Bank

Assuming the 90 days trading horizon Charter Hall Retail is expected to under-perform the Commonwealth Bank. In addition to that, Charter Hall is 4.7 times more volatile than Commonwealth Bank of. It trades about -0.22 of its total potential returns per unit of risk. Commonwealth Bank of is currently generating about 0.18 per unit of volatility. If you would invest  10,245  in Commonwealth Bank of on September 26, 2024 and sell it today you would earn a total of  81.00  from holding Commonwealth Bank of or generate 0.79% return on investment over 90 days.

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

Charter Hall Retail  vs.  Commonwealth Bank of

Charter Hall Retail

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Charter Hall Retail has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Commonwealth Bank

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Commonwealth Bank of are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat 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.

Pair Trading with Charter Hall and Commonwealth Bank

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

The idea behind Charter Hall Retail and Commonwealth Bank of 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.