Correlation Between National Australia and Medibank Private
Can any of the company-specific risk be diversified away by investing in both National Australia and Medibank Private 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 Medibank Private 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 Medibank Private, you can compare the effects of market volatilities on National Australia and Medibank Private 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 Medibank Private. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Australia and Medibank Private.
Diversification Opportunities for National Australia and Medibank Private
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between National and Medibank is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding National Australia Bank and Medibank Private in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medibank Private 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 Medibank Private. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medibank Private has no effect on the direction of National Australia i.e., National Australia and Medibank Private go up and down completely randomly.
Pair Corralation between National Australia and Medibank Private
Assuming the 90 days trading horizon National Australia is expected to generate 2.3 times less return on investment than Medibank Private. But when comparing it to its historical volatility, National Australia Bank is 4.85 times less risky than Medibank Private. It trades about 0.08 of its potential returns per unit of risk. Medibank Private is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 341.00 in Medibank Private on September 14, 2024 and sell it today you would earn a total of 33.00 from holding Medibank Private or generate 9.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
National Australia Bank vs. Medibank Private
Performance |
| Timeline |
| National Australia Bank |
| Medibank Private |
National Australia and Medibank Private Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Australia and Medibank Private
The main advantage of trading using opposite National Australia and Medibank Private positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Australia position performs unexpectedly, Medibank Private 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 Medibank Private will offset losses from the drop in Medibank Private's long position.| National Australia vs. Global Health | National Australia vs. Epsilon Healthcare | National Australia vs. Medical Developments International | National Australia vs. EVE Health Group |
| Medibank Private vs. EP Financial Group | Medibank Private vs. IDP Education | Medibank Private vs. Iron Road | Medibank Private vs. oOhMedia |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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