Correlation Between National Australia and Australian Unity
Can any of the company-specific risk be diversified away by investing in both National Australia and Australian Unity 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 Unity 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 Unity Office, you can compare the effects of market volatilities on National Australia and Australian Unity 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 Unity. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Australia and Australian Unity.
Diversification Opportunities for National Australia and Australian Unity
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between National and Australian is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding National Australia Bank and Australian Unity Office in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Australian Unity Office 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 Unity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Australian Unity Office has no effect on the direction of National Australia i.e., National Australia and Australian Unity go up and down completely randomly.
Pair Corralation between National Australia and Australian Unity
Assuming the 90 days trading horizon National Australia Bank is expected to generate 0.17 times more return on investment than Australian Unity. However, National Australia Bank is 5.9 times less risky than Australian Unity. It trades about -0.11 of its potential returns per unit of risk. Australian Unity Office is currently generating about -0.2 per unit of risk. If you would invest 10,561 in National Australia Bank on August 29, 2024 and sell it today you would lose (53.00) from holding National Australia Bank or give up 0.5% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
National Australia Bank vs. Australian Unity Office
Performance |
| Timeline |
| National Australia Bank |
| Australian Unity Office |
National Australia and Australian Unity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Australia and Australian Unity
The main advantage of trading using opposite National Australia and Australian Unity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Australia position performs unexpectedly, Australian Unity 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 Unity will offset losses from the drop in Australian Unity's long position.| National Australia vs. Westpac Banking | National Australia vs. Commonwealth Bank of | National Australia vs. Commonwealth Bank of |
| Australian Unity vs. Champion Iron | Australian Unity vs. Ridley | Australian Unity vs. Peel Mining | Australian Unity vs. Australian Dairy Farms |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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