Correlation Between Energy Technologies and Commonwealth Bank

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

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

Diversification Opportunities for Energy Technologies and Commonwealth Bank

0.17

Correlation Coefficient

Energy Technologies  Commonwealth Bank

Average diversification

The 3 months correlation between Energy and Commonwealth is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Energy Technologies Limited and Commonwealth Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commonwealth Bank and Energy Technologies 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 Energy Technologies Limited 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 Energy Technologies i.e., Energy Technologies and Commonwealth Bank go up and down completely randomly.

Pair Corralation between Energy Technologies and Commonwealth Bank

If you would invest  3.00  in Energy Technologies Limited on October 22, 2024 and sell it today you would earn a total of  0.10  from holding Energy Technologies Limited or generate 3.33% return on investment over 90 days.

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

Energy Technologies Limited  vs.  Commonwealth Bank of

Energy Technologies

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Energy Technologies Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Energy Technologies is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Commonwealth Bank

Risk-Adjusted Performance

0 of 100

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 somewhat strong basic indicators, Commonwealth Bank is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Energy Technologies and Commonwealth Bank

The main advantage of trading using opposite Energy Technologies and Commonwealth Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Energy Technologies 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 Energy Technologies Limited and Commonwealth Bank of 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.