Correlation Between Champion Iron and National Australia
Can any of the company-specific risk be diversified away by investing in both Champion Iron 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 Champion Iron and National Australia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Champion Iron and National Australia Bank, you can compare the effects of market volatilities on Champion Iron 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 Champion Iron with a short position of National Australia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Champion Iron and National Australia.
Diversification Opportunities for Champion Iron and National Australia
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Champion and National is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Champion Iron 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 Champion Iron 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 Champion Iron 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 Champion Iron i.e., Champion Iron and National Australia go up and down completely randomly.
Pair Corralation between Champion Iron and National Australia
Assuming the 90 days trading horizon Champion Iron is expected to under-perform the National Australia. In addition to that, Champion Iron is 2.18 times more volatile than National Australia Bank. It trades about -0.09 of its total potential returns per unit of risk. National Australia Bank is currently generating about 0.0 per unit of volatility. If you would invest 10,618 in National Australia Bank on September 2, 2024 and sell it today you would lose (13.00) from holding National Australia Bank or give up 0.12% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Champion Iron vs. National Australia Bank
Performance |
| Timeline |
| Champion Iron |
| National Australia Bank |
Champion Iron and National Australia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Champion Iron and National Australia
The main advantage of trading using opposite Champion Iron and National Australia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Champion Iron 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.| Champion Iron vs. Lendlease Group | Champion Iron vs. Fisher Paykel Healthcare | Champion Iron vs. Apiam Animal Health | Champion Iron vs. Singular Health Group |
| National Australia vs. Dexus Convenience Retail | National Australia vs. Richmond Vanadium Technology | National Australia vs. Thorney Technologies | National Australia vs. WiseTech Global Limited |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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