Correlation Between SPARTAN STORES and Commonwealth Bank

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Can any of the company-specific risk be diversified away by investing in both SPARTAN STORES 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 SPARTAN STORES and Commonwealth Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPARTAN STORES and Commonwealth Bank of, you can compare the effects of market volatilities on SPARTAN STORES 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 SPARTAN STORES with a short position of Commonwealth Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPARTAN STORES and Commonwealth Bank.

Diversification Opportunities for SPARTAN STORES and Commonwealth Bank

SPARTANCommonwealthDiversified AwaySPARTANCommonwealthDiversified Away100%
0.35
  Correlation Coefficient

Weak diversification

The 3 months correlation between SPARTAN and Commonwealth is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding SPARTAN STORES and Commonwealth Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commonwealth Bank and SPARTAN STORES 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 SPARTAN STORES 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 SPARTAN STORES i.e., SPARTAN STORES and Commonwealth Bank go up and down completely randomly.

Pair Corralation between SPARTAN STORES and Commonwealth Bank

Assuming the 90 days trading horizon SPARTAN STORES is expected to generate 3.25 times more return on investment than Commonwealth Bank. However, SPARTAN STORES is 3.25 times more volatile than Commonwealth Bank of. It trades about 0.21 of its potential returns per unit of risk. Commonwealth Bank of is currently generating about 0.41 per unit of risk. If you would invest  1,760  in SPARTAN STORES on November 18, 2024 and sell it today you would earn a total of  220.00  from holding SPARTAN STORES or generate 12.5% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

SPARTAN STORES  vs.  Commonwealth Bank of

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -505
JavaScript chart by amCharts 3.21.15SRJ CWW
       Timeline  
SPARTAN STORES 

Risk-Adjusted Performance

OK

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in SPARTAN STORES are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile forward-looking indicators, SPARTAN STORES exhibited solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb1717.51818.51919.520
Commonwealth Bank 

Risk-Adjusted Performance

OK

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Commonwealth Bank of are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Commonwealth Bank may actually be approaching a critical reversion point that can send shares even higher in March 2025.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb9092949698100

SPARTAN STORES and Commonwealth Bank Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-6.55-4.91-3.26-1.620.02741.683.45.116.82 0.050.100.150.200.25
JavaScript chart by amCharts 3.21.15SRJ CWW
       Returns  

Pair Trading with SPARTAN STORES and Commonwealth Bank

The main advantage of trading using opposite SPARTAN STORES and Commonwealth Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPARTAN STORES 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 SPARTAN STORES 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.
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.

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