Correlation Between COMMONWBK AUSTRSPADRS and CHINA CONBANK

Can any of the company-specific risk be diversified away by investing in both COMMONWBK AUSTRSPADRS and CHINA CONBANK 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 COMMONWBK AUSTRSPADRS and CHINA CONBANK into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between COMMONWBK AUSTRSPADRS and CHINA BANK ADR20, you can compare the effects of market volatilities on COMMONWBK AUSTRSPADRS and CHINA CONBANK 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 COMMONWBK AUSTRSPADRS with a short position of CHINA CONBANK. Check out your portfolio center. Please also check ongoing floating volatility patterns of COMMONWBK AUSTRSPADRS and CHINA CONBANK.

Diversification Opportunities for COMMONWBK AUSTRSPADRS and CHINA CONBANK

0.34

Correlation Coefficient

COMMONWBK AUSTRSPADRS  CHINA CONBANK

Weak diversification

The 3 months correlation between COMMONWBK and CHINA is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding COMMONWBK AUSTRSPADRS and CHINA BANK ADR20 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHINA BANK ADR20 and COMMONWBK AUSTRSPADRS 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 COMMONWBK AUSTRSPADRS are associated (or correlated) with CHINA CONBANK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHINA BANK ADR20 has no effect on the direction of COMMONWBK AUSTRSPADRS i.e., COMMONWBK AUSTRSPADRS and CHINA CONBANK go up and down completely randomly.

Pair Corralation between COMMONWBK AUSTRSPADRS and CHINA CONBANK

Assuming the 90 days trading horizon COMMONWBK AUSTRSPADRS is expected to generate 1.19 times less return on investment than CHINA CONBANK. But when comparing it to its historical volatility, COMMONWBK AUSTRSPADRS is 1.46 times less risky than CHINA CONBANK. It trades about 0.14 of its potential returns per unit of risk. CHINA BANK ADR20 is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  1,210  in CHINA BANK ADR20 on September 2, 2024 and sell it today you would earn a total of  170.00  from holding CHINA BANK ADR20 or generate 14.05% return on investment over 90 days.

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

COMMONWBK AUSTRSPADRS  vs.  CHINA BANK ADR20

COMMONWBK AUSTRSPADRS

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in COMMONWBK AUSTRSPADRS are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, COMMONWBK AUSTRSPADRS may actually be approaching a critical reversion point that can send shares even higher in January 2025.

CHINA BANK ADR20

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CHINA BANK ADR20 are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, CHINA CONBANK reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with COMMONWBK AUSTRSPADRS and CHINA CONBANK

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

The idea behind COMMONWBK AUSTRSPADRS and CHINA BANK ADR20 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.