Correlation Between Garda Diversified and Commonwealth Bank

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

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

Diversification Opportunities for Garda Diversified and Commonwealth Bank

0.67

Correlation Coefficient

Garda Diversified  Commonwealth Bank

Poor diversification

The 3 months correlation between Garda and Commonwealth is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Garda Diversified Ppty and Commonwealth Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commonwealth Bank and Garda Diversified 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 Garda Diversified Ppty 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 Garda Diversified i.e., Garda Diversified and Commonwealth Bank go up and down completely randomly.

Pair Corralation between Garda Diversified and Commonwealth Bank

Assuming the 90 days trading horizon Garda Diversified is expected to generate 1.83 times less return on investment than Commonwealth Bank. In addition to that, Garda Diversified is 1.1 times more volatile than Commonwealth Bank. It trades about 0.09 of its total potential returns per unit of risk. Commonwealth Bank is currently generating about 0.17 per unit of volatility. If you would invest  13,419  in Commonwealth Bank on October 2, 2024 and sell it today you would earn a total of  1,906  from holding Commonwealth Bank or generate 14.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

Garda Diversified Ppty  vs.  Commonwealth Bank

Garda Diversified Ppty

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Garda Diversified Ppty are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Garda Diversified may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Commonwealth Bank

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Commonwealth Bank are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Commonwealth Bank unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Garda Diversified and Commonwealth Bank

The main advantage of trading using opposite Garda Diversified and Commonwealth Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Garda Diversified 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 Garda Diversified Ppty 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.