Correlation Between Commonwealth Bank and AXP Energy

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

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

Diversification Opportunities for Commonwealth Bank and AXP Energy

-0.4

Correlation Coefficient

Commonwealth Bank  AXP Energy

Very good diversification

The 3 months correlation between Commonwealth and AXP is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Commonwealth Bank of and AXP Energy Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AXP Energy Limited and Commonwealth Bank 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 Commonwealth Bank of are associated (or correlated) with AXP Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AXP Energy Limited has no effect on the direction of Commonwealth Bank i.e., Commonwealth Bank and AXP Energy go up and down completely randomly.

Pair Corralation between Commonwealth Bank and AXP Energy

Assuming the 90 days trading horizon Commonwealth Bank is expected to generate 129.03 times less return on investment than AXP Energy. But when comparing it to its historical volatility, Commonwealth Bank of is 265.2 times less risky than AXP Energy. It trades about 0.18 of its potential returns per unit of risk. AXP Energy Limited is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  0.10  in AXP Energy Limited on March 2, 2025 and sell it today you would earn a total of  0.00  from holding AXP Energy Limited or generate 0.0% return on investment over 90 days.

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

Commonwealth Bank of  vs.  AXP Energy Limited

Commonwealth Bank

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Commonwealth Bank of are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. 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.

AXP Energy Limited

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in AXP Energy Limited are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, AXP Energy unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Commonwealth Bank and AXP Energy

The main advantage of trading using opposite Commonwealth Bank and AXP Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Commonwealth Bank position performs unexpectedly, AXP Energy 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 AXP Energy will offset losses from the drop in AXP Energy's long position.

The idea behind Commonwealth Bank of and AXP Energy Limited 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..