Correlation Between National Australia and BSP Financial
Can any of the company-specific risk be diversified away by investing in both National Australia and BSP 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 BSP 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 BSP Financial Group, you can compare the effects of market volatilities on National Australia and BSP 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 BSP Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Australia and BSP Financial.
Diversification Opportunities for National Australia and BSP Financial
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between National and BSP is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding National Australia Bank and BSP Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BSP Financial Group 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 BSP Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BSP Financial Group has no effect on the direction of National Australia i.e., National Australia and BSP Financial go up and down completely randomly.
Pair Corralation between National Australia and BSP Financial
Assuming the 90 days trading horizon National Australia Bank is expected to under-perform the BSP Financial. But the preferred stock apears to be less risky and, when comparing its historical volatility, National Australia Bank is 8.86 times less risky than BSP Financial. The preferred stock trades about -0.11 of its potential returns per unit of risk. The BSP Financial Group is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 630.00 in BSP Financial Group on August 28, 2024 and sell it today you would earn a total of 20.00 from holding BSP Financial Group or generate 3.17% 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. BSP Financial Group
Performance |
| Timeline |
| National Australia Bank |
| BSP Financial Group |
National Australia and BSP Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Australia and BSP Financial
The main advantage of trading using opposite National Australia and BSP Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Australia position performs unexpectedly, BSP 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 BSP Financial will offset losses from the drop in BSP 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 |
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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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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