Correlation Between National Australia and Nova Eye
Can any of the company-specific risk be diversified away by investing in both National Australia and Nova Eye 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 Nova Eye 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 Nova Eye Medical, you can compare the effects of market volatilities on National Australia and Nova Eye 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 Nova Eye. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Australia and Nova Eye.
Diversification Opportunities for National Australia and Nova Eye
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between National and Nova is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding National Australia Bank and Nova Eye Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nova Eye Medical 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 Nova Eye. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nova Eye Medical has no effect on the direction of National Australia i.e., National Australia and Nova Eye go up and down completely randomly.
Pair Corralation between National Australia and Nova Eye
Assuming the 90 days trading horizon National Australia is expected to generate 2.44 times less return on investment than Nova Eye. But when comparing it to its historical volatility, National Australia Bank is 21.9 times less risky than Nova Eye. It trades about 0.07 of its potential returns per unit of risk. Nova Eye Medical is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 28.00 in Nova Eye Medical on August 25, 2024 and sell it today you would lose (13.00) from holding Nova Eye Medical or give up 46.43% 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. Nova Eye Medical
Performance |
| Timeline |
| National Australia Bank |
| Nova Eye Medical |
National Australia and Nova Eye Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Australia and Nova Eye
The main advantage of trading using opposite National Australia and Nova Eye positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Australia position performs unexpectedly, Nova Eye 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 Nova Eye will offset losses from the drop in Nova Eye's long position.| National Australia vs. DY6 Metals | National Australia vs. Perseus Mining | National Australia vs. Aurelia Metals | National Australia vs. Metro Mining |
| Nova Eye vs. Strickland Metals | Nova Eye vs. Sky Metals | Nova Eye vs. Air New Zealand | Nova Eye vs. Home Consortium |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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