Correlation Between Centrex Metals and Commonwealth Bank

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

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

Diversification Opportunities for Centrex Metals and Commonwealth Bank

-0.9

Correlation Coefficient

Centrex Metals  Commonwealth Bank

Pay attention - limited upside

The 3 months correlation between Centrex and Commonwealth is -0.9. Overlapping area represents the amount of risk that can be diversified away by holding Centrex Metals and Commonwealth Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commonwealth Bank and Centrex Metals 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 Centrex Metals 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 Centrex Metals i.e., Centrex Metals and Commonwealth Bank go up and down completely randomly.

Pair Corralation between Centrex Metals and Commonwealth Bank

Assuming the 90 days trading horizon Centrex Metals is expected to under-perform the Commonwealth Bank. In addition to that, Centrex Metals is 4.77 times more volatile than Commonwealth Bank. It trades about -0.06 of its total potential returns per unit of risk. Commonwealth Bank is currently generating about 0.09 per unit of volatility. If you would invest  10,028  in Commonwealth Bank on October 10, 2024 and sell it today you would earn a total of  5,683  from holding Commonwealth Bank or generate 56.67% return on investment over 90 days.

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

Centrex Metals  vs.  Commonwealth Bank

Centrex Metals

Risk-Adjusted Performance

0 of 100

Very Weak

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

Commonwealth Bank

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Commonwealth Bank are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Commonwealth Bank unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Centrex Metals and Commonwealth Bank

The main advantage of trading using opposite Centrex Metals and Commonwealth Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Centrex Metals 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 Centrex Metals and Commonwealth Bank 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.