Correlation Between Australian Unity and National Australia
Can any of the company-specific risk be diversified away by investing in both Australian Unity and National Australia 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 Australian Unity and National Australia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Australian Unity Office and National Australia Bank, you can compare the effects of market volatilities on Australian Unity and National Australia 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 Australian Unity with a short position of National Australia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Australian Unity and National Australia.
Diversification Opportunities for Australian Unity and National Australia
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Australian and National is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Australian Unity Office and National Australia Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Australia Bank and Australian Unity 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 Australian Unity Office are associated (or correlated) with National Australia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Australia Bank has no effect on the direction of Australian Unity i.e., Australian Unity and National Australia go up and down completely randomly.
Pair Corralation between Australian Unity and National Australia
Assuming the 90 days trading horizon Australian Unity Office is expected to under-perform the National Australia. In addition to that, Australian Unity is 5.9 times more volatile than National Australia Bank. It trades about -0.2 of its total potential returns per unit of risk. National Australia Bank is currently generating about -0.11 per unit of volatility. If you would invest 10,561 in National Australia Bank on August 29, 2024 and sell it today you would lose (53.00) from holding National Australia Bank or give up 0.5% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Australian Unity Office vs. National Australia Bank
Performance |
| Timeline |
| Australian Unity Office |
| National Australia Bank |
Australian Unity and National Australia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Australian Unity and National Australia
The main advantage of trading using opposite Australian Unity and National Australia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Australian Unity position performs unexpectedly, National Australia 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 National Australia will offset losses from the drop in National Australia's long position.| Australian Unity vs. Champion Iron | Australian Unity vs. Ridley | Australian Unity vs. Peel Mining | Australian Unity vs. Australian Dairy Farms |
| National Australia vs. Westpac Banking | National Australia vs. Commonwealth Bank of | National Australia vs. Commonwealth Bank of |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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