Correlation Between National Australia and Environmental
Can any of the company-specific risk be diversified away by investing in both National Australia and Environmental 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 Environmental 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 The Environmental Group, you can compare the effects of market volatilities on National Australia and Environmental 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 Environmental. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Australia and Environmental.
Diversification Opportunities for National Australia and Environmental
-0.1 | Correlation Coefficient |
Good diversification
The 3 months correlation between National and Environmental is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding National Australia Bank and The Environmental Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on The Environmental 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 Environmental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of The Environmental has no effect on the direction of National Australia i.e., National Australia and Environmental go up and down completely randomly.
Pair Corralation between National Australia and Environmental
Assuming the 90 days trading horizon National Australia Bank is expected to under-perform the Environmental. But the preferred stock apears to be less risky and, when comparing its historical volatility, National Australia Bank is 8.34 times less risky than Environmental. The preferred stock trades about -0.03 of its potential returns per unit of risk. The The Environmental Group is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 27.00 in The Environmental Group on September 15, 2024 and sell it today you would earn a total of 1.00 from holding The Environmental Group or generate 3.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
National Australia Bank vs. The Environmental Group
Performance |
| Timeline |
| National Australia Bank |
| The Environmental |
National Australia and Environmental Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Australia and Environmental
The main advantage of trading using opposite National Australia and Environmental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Australia position performs unexpectedly, Environmental 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 Environmental will offset losses from the drop in Environmental's long position.| National Australia vs. Black Rock Mining | National Australia vs. Cleanaway Waste Management | National Australia vs. Emetals | National Australia vs. Green Technology Metals |
| Environmental vs. Auswide Bank | Environmental vs. Step One Clothing | Environmental vs. Bisalloy Steel Group | Environmental 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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