Correlation Between Commonwealth Bank and AOYAMA TRADING

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

Diversification Opportunities for Commonwealth Bank and AOYAMA TRADING

0.37

Correlation Coefficient

Commonwealth Bank  AOYAMA TRADING

Weak diversification

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

Pair Corralation between Commonwealth Bank and AOYAMA TRADING

Assuming the 90 days horizon Commonwealth Bank of is expected to under-perform the AOYAMA TRADING. In addition to that, Commonwealth Bank is 1.13 times more volatile than AOYAMA TRADING. It trades about -0.08 of its total potential returns per unit of risk. AOYAMA TRADING is currently generating about -0.08 per unit of volatility. If you would invest  1,390  in AOYAMA TRADING on December 23, 2024 and sell it today you would lose (80.00) from holding AOYAMA TRADING or give up 5.76% of portfolio value over 90 days.

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

Commonwealth Bank of  vs.  AOYAMA TRADING

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. Despite nearly stable basic indicators, Commonwealth Bank is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

AOYAMA TRADING

Risk-Adjusted Performance

Very Weak

Over the last 90 days AOYAMA TRADING has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, AOYAMA TRADING is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Commonwealth Bank and AOYAMA TRADING

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

The idea behind Commonwealth Bank of and AOYAMA TRADING 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.

Check out your portfolio center.

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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.