Correlation Between Commonwealth Bank and VULCAN MATERIALS

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

Diversification Opportunities for Commonwealth Bank and VULCAN MATERIALS

0.79

Correlation Coefficient

Commonwealth Bank  VULCAN MATERIALS

Poor diversification

The 3 months correlation between Commonwealth and VULCAN is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Commonwealth Bank of and VULCAN MATERIALS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VULCAN MATERIALS 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 VULCAN MATERIALS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VULCAN MATERIALS has no effect on the direction of Commonwealth Bank i.e., Commonwealth Bank and VULCAN MATERIALS go up and down completely randomly.

Pair Corralation between Commonwealth Bank and VULCAN MATERIALS

Assuming the 90 days horizon Commonwealth Bank of is expected to generate 0.77 times more return on investment than VULCAN MATERIALS. However, Commonwealth Bank of is 1.29 times less risky than VULCAN MATERIALS. It trades about -0.1 of its potential returns per unit of risk. VULCAN MATERIALS is currently generating about -0.13 per unit of risk. If you would invest  9,140  in Commonwealth Bank of on December 25, 2024 and sell it today you would lose (704.00) from holding Commonwealth Bank of or give up 7.7% of portfolio value over 90 days.

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

Commonwealth Bank of  vs.  VULCAN MATERIALS

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 latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

VULCAN MATERIALS

Risk-Adjusted Performance

Very Weak

Over the last 90 days VULCAN MATERIALS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Commonwealth Bank and VULCAN MATERIALS

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

The idea behind Commonwealth Bank of and VULCAN MATERIALS 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.