Correlation Between National Australia and Insignia Financial
Can any of the company-specific risk be diversified away by investing in both National Australia and Insignia Financial 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 Insignia Financial 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 Insignia Financial, you can compare the effects of market volatilities on National Australia and Insignia Financial 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 Insignia Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Australia and Insignia Financial.
Diversification Opportunities for National Australia and Insignia Financial
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between National and Insignia is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding National Australia Bank and Insignia Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Insignia Financial 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 Insignia Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Insignia Financial has no effect on the direction of National Australia i.e., National Australia and Insignia Financial go up and down completely randomly.
Pair Corralation between National Australia and Insignia Financial
Assuming the 90 days trading horizon National Australia is expected to generate 23.16 times less return on investment than Insignia Financial. But when comparing it to its historical volatility, National Australia Bank is 12.08 times less risky than Insignia Financial. It trades about 0.06 of its potential returns per unit of risk. Insignia Financial is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 224.00 in Insignia Financial on August 26, 2024 and sell it today you would earn a total of 93.00 from holding Insignia Financial or generate 41.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
National Australia Bank vs. Insignia Financial
Performance |
| Timeline |
| National Australia Bank |
| Insignia Financial |
National Australia and Insignia Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Australia and Insignia Financial
The main advantage of trading using opposite National Australia and Insignia Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Australia position performs unexpectedly, Insignia Financial 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 Insignia Financial will offset losses from the drop in Insignia Financial's long position.| National Australia vs. Westpac Banking | National Australia vs. Commonwealth Bank | National Australia vs. National Australia Bank | National Australia vs. Westpac Banking Corp |
| Insignia Financial vs. National Australia Bank | Insignia Financial vs. National Australia Bank | Insignia Financial vs. Westpac Banking | Insignia Financial vs. National Australia Bank |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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