Correlation Between Commonwealth Bank and AGCO

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

Diversification Opportunities for Commonwealth Bank and AGCO

0.19

Correlation Coefficient

Commonwealth Bank  AGCO

Average diversification

The 3 months correlation between Commonwealth and AGCO is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Commonwealth Bank of and AGCO Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AGCO 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 AGCO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AGCO has no effect on the direction of Commonwealth Bank i.e., Commonwealth Bank and AGCO go up and down completely randomly.

Pair Corralation between Commonwealth Bank and AGCO

Assuming the 90 days horizon Commonwealth Bank of is expected to under-perform the AGCO. But the stock apears to be less risky and, when comparing its historical volatility, Commonwealth Bank of is 1.86 times less risky than AGCO. The stock trades about -0.01 of its potential returns per unit of risk. The AGCO Corporation is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  9,474  in AGCO Corporation on December 4, 2024 and sell it today you would lose (170.00) from holding AGCO Corporation or give up 1.79% of portfolio value over 90 days.

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

Commonwealth Bank of  vs.  AGCO Corp.

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 newest stock price disturbance, may contribute to mid-run losses for the stockholders.

AGCO

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Commonwealth Bank and AGCO

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

The idea behind Commonwealth Bank of and AGCO Corporation 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.