Correlation Between National Australia and ANZ Group
Can any of the company-specific risk be diversified away by investing in both National Australia and ANZ Group 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 ANZ Group 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 ANZ Group Holdings, you can compare the effects of market volatilities on National Australia and ANZ Group 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 ANZ Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Australia and ANZ Group.
Diversification Opportunities for National Australia and ANZ Group
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between National and ANZ is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding National Australia Bank and ANZ Group Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ANZ Group 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 ANZ Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ANZ Group Holdings has no effect on the direction of National Australia i.e., National Australia and ANZ Group go up and down completely randomly.
Pair Corralation between National Australia and ANZ Group
Assuming the 90 days trading horizon National Australia Bank is expected to under-perform the ANZ Group. But the preferred stock apears to be less risky and, when comparing its historical volatility, National Australia Bank is 1.29 times less risky than ANZ Group. The preferred stock trades about -0.11 of its potential returns per unit of risk. The ANZ Group Holdings is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest 10,420 in ANZ Group Holdings on August 29, 2024 and sell it today you would lose (40.00) from holding ANZ Group Holdings or give up 0.38% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
National Australia Bank vs. ANZ Group Holdings
Performance |
| Timeline |
| National Australia Bank |
| ANZ Group Holdings |
National Australia and ANZ Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Australia and ANZ Group
The main advantage of trading using opposite National Australia and ANZ Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Australia position performs unexpectedly, ANZ Group 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 ANZ Group will offset losses from the drop in ANZ Group'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 |
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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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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