Correlation Between National Australia and Australian Bond
Can any of the company-specific risk be diversified away by investing in both National Australia and Australian Bond 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 Australian Bond 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 Australian Bond Exchange, you can compare the effects of market volatilities on National Australia and Australian Bond 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 Australian Bond. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Australia and Australian Bond.
Diversification Opportunities for National Australia and Australian Bond
-0.25 | Correlation Coefficient |
Very good diversification
The 3 months correlation between National and Australian is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding National Australia Bank and Australian Bond Exchange in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Australian Bond Exchange 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 Australian Bond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Australian Bond Exchange has no effect on the direction of National Australia i.e., National Australia and Australian Bond go up and down completely randomly.
Pair Corralation between National Australia and Australian Bond
Assuming the 90 days trading horizon National Australia is expected to generate 37.57 times less return on investment than Australian Bond. But when comparing it to its historical volatility, National Australia Bank is 27.78 times less risky than Australian Bond. It trades about 0.07 of its potential returns per unit of risk. Australian Bond Exchange is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 2.00 in Australian Bond Exchange on September 14, 2024 and sell it today you would earn a total of 1.50 from holding Australian Bond Exchange or generate 75.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.23% |
| Values | Daily Returns |
National Australia Bank vs. Australian Bond Exchange
Performance |
| Timeline |
| National Australia Bank |
| Australian Bond Exchange |
National Australia and Australian Bond Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Australia and Australian Bond
The main advantage of trading using opposite National Australia and Australian Bond positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Australia position performs unexpectedly, Australian Bond 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 Australian Bond will offset losses from the drop in Australian Bond's long position.| National Australia vs. Readytech Holdings | National Australia vs. Zoom2u Technologies | National Australia vs. Thorney Technologies | National Australia vs. Bio Gene Technology |
| Australian Bond vs. Westpac Banking | Australian Bond vs. National Australia Bank | Australian Bond vs. National Australia Bank | Australian Bond 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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