Correlation Between National Australia and Austchina Holdings
Can any of the company-specific risk be diversified away by investing in both National Australia and Austchina Holdings 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 Austchina Holdings 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 Austchina Holdings, you can compare the effects of market volatilities on National Australia and Austchina Holdings 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 Austchina Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Australia and Austchina Holdings.
Diversification Opportunities for National Australia and Austchina Holdings
-0.48 | Correlation Coefficient |
Very good diversification
The 3 months correlation between National and Austchina is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding National Australia Bank and Austchina Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Austchina Holdings 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 Austchina Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Austchina Holdings has no effect on the direction of National Australia i.e., National Australia and Austchina Holdings go up and down completely randomly.
Pair Corralation between National Australia and Austchina Holdings
Assuming the 90 days trading horizon National Australia is expected to generate 34.06 times less return on investment than Austchina Holdings. But when comparing it to its historical volatility, National Australia Bank is 73.5 times less risky than Austchina Holdings. It trades about 0.09 of its potential returns per unit of risk. Austchina Holdings is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 0.20 in Austchina Holdings on August 29, 2024 and sell it today you would lose (0.10) from holding Austchina Holdings or give up 50.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
National Australia Bank vs. Austchina Holdings
Performance |
| Timeline |
| National Australia Bank |
| Austchina Holdings |
National Australia and Austchina Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Australia and Austchina Holdings
The main advantage of trading using opposite National Australia and Austchina Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Australia position performs unexpectedly, Austchina Holdings 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 Austchina Holdings will offset losses from the drop in Austchina Holdings' long position.| National Australia vs. Singular Health Group | National Australia vs. Kingsrose Mining | National Australia vs. Macquarie Technology Group | National Australia vs. Ora Banda Mining |
| Austchina Holdings vs. Advanced Braking Technology | Austchina Holdings vs. Phoslock Environmental Technologies | Austchina Holdings vs. Perseus Mining | Austchina Holdings vs. Bisalloy Steel 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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