Correlation Between M3 Mining and Commonwealth Bank

Can any of the company-specific risk be diversified away by investing in both M3 Mining 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 M3 Mining and Commonwealth Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between M3 Mining and Commonwealth Bank of, you can compare the effects of market volatilities on M3 Mining 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 M3 Mining with a short position of Commonwealth Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of M3 Mining and Commonwealth Bank.

Diversification Opportunities for M3 Mining and Commonwealth Bank

0.0

Correlation Coefficient

M3 Mining  Commonwealth Bank

Pay attention - limited upside

The 3 months correlation between M3M and Commonwealth is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding M3 Mining and Commonwealth Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commonwealth Bank and M3 Mining 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 M3 Mining 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 M3 Mining i.e., M3 Mining and Commonwealth Bank go up and down completely randomly.

Pair Corralation between M3 Mining and Commonwealth Bank

Assuming the 90 days trading horizon M3 Mining is expected to under-perform the Commonwealth Bank. In addition to that, M3 Mining is 25.62 times more volatile than Commonwealth Bank of. It trades about -0.04 of its total potential returns per unit of risk. Commonwealth Bank of is currently generating about 0.05 per unit of volatility. If you would invest  9,878  in Commonwealth Bank of on September 13, 2024 and sell it today you would earn a total of  172.00  from holding Commonwealth Bank of or generate 1.74% return on investment over 90 days.

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

M3 Mining  vs.  Commonwealth Bank of

M3 Mining

Risk-Adjusted Performance

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Very Weak

Over the last 90 days M3 Mining 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 January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm 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 current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with M3 Mining and Commonwealth Bank

The main advantage of trading using opposite M3 Mining and Commonwealth Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if M3 Mining 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 M3 Mining 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.