Correlation Between National Australia and Australia
Can any of the company-specific risk be diversified away by investing in both National Australia and 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 National Australia and Australia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between National Australia Bank and Australia and New, you can compare the effects of market volatilities on National Australia and 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 National Australia with a short position of Australia. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Australia and Australia.
Diversification Opportunities for National Australia and Australia
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between National and Australia is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding National Australia Bank and Australia and New in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Australia and New and National Australia 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 National Australia Bank are associated (or correlated) with Australia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Australia and New has no effect on the direction of National Australia i.e., National Australia and Australia go up and down completely randomly.
Pair Corralation between National Australia and Australia
Assuming the 90 days trading horizon National Australia Bank is expected to generate 1.17 times more return on investment than Australia. However, National Australia is 1.17 times more volatile than Australia and New. It trades about 0.28 of its potential returns per unit of risk. Australia and New is currently generating about 0.29 per unit of risk. If you would invest 3,755 in National Australia Bank on November 4, 2024 and sell it today you would earn a total of 259.00 from holding National Australia Bank or generate 6.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
National Australia Bank vs. Australia and New
Performance |
| Timeline |
| National Australia Bank |
| Australia and New |
National Australia and Australia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Australia and Australia
The main advantage of trading using opposite National Australia and Australia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Australia position performs unexpectedly, 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 Australia will offset losses from the drop in Australia's long position.| National Australia vs. DY6 Metals | National Australia vs. Stelar Metals | National Australia vs. Centrex Metals | National Australia vs. Home Consortium |
| Australia vs. Duxton Broadacre Farms | Australia vs. Iron Road | Australia vs. Oceania Healthcare | Australia vs. Beston Global Food |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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