Correlation Between National Australia and Computershare
Can any of the company-specific risk be diversified away by investing in both National Australia and Computershare 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 Computershare 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 Computershare, you can compare the effects of market volatilities on National Australia and Computershare 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 Computershare. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Australia and Computershare.
Diversification Opportunities for National Australia and Computershare
-0.05 | Correlation Coefficient |
Good diversification
The 3 months correlation between National and Computershare is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding National Australia Bank and Computershare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Computershare 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 Computershare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Computershare has no effect on the direction of National Australia i.e., National Australia and Computershare go up and down completely randomly.
Pair Corralation between National Australia and Computershare
Assuming the 90 days trading horizon National Australia is expected to generate 1.25 times less return on investment than Computershare. But when comparing it to its historical volatility, National Australia Bank is 1.24 times less risky than Computershare. It trades about 0.06 of its potential returns per unit of risk. Computershare is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 2,331 in Computershare on November 1, 2024 and sell it today you would earn a total of 1,139 from holding Computershare or generate 48.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
National Australia Bank vs. Computershare
Performance |
| Timeline |
| National Australia Bank |
| Computershare |
National Australia and Computershare Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Australia and Computershare
The main advantage of trading using opposite National Australia and Computershare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Australia position performs unexpectedly, Computershare 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 Computershare will offset losses from the drop in Computershare's long position.| National Australia vs. Fisher Paykel Healthcare | National Australia vs. Hudson Investment Group | National Australia vs. Steamships Trading | National Australia vs. Sonic Healthcare |
| Computershare vs. Medibank Private | Computershare vs. Health and Plant | Computershare vs. Insurance Australia Group | Computershare vs. Finexia Financial Group |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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