Correlation Between National Australia and Gold Road
Can any of the company-specific risk be diversified away by investing in both National Australia and Gold Road 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 Gold Road 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 Gold Road Resources, you can compare the effects of market volatilities on National Australia and Gold Road 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 Gold Road. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Australia and Gold Road.
Diversification Opportunities for National Australia and Gold Road
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between National and Gold is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding National Australia Bank and Gold Road Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gold Road Resources 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 Gold Road. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gold Road Resources has no effect on the direction of National Australia i.e., National Australia and Gold Road go up and down completely randomly.
Pair Corralation between National Australia and Gold Road
Assuming the 90 days trading horizon National Australia Bank is expected to generate 0.1 times more return on investment than Gold Road. However, National Australia Bank is 9.65 times less risky than Gold Road. It trades about 0.17 of its potential returns per unit of risk. Gold Road Resources is currently generating about -0.05 per unit of risk. If you would invest 10,525 in National Australia Bank on August 30, 2024 and sell it today you would earn a total of 100.00 from holding National Australia Bank or generate 0.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
National Australia Bank vs. Gold Road Resources
Performance |
| Timeline |
| National Australia Bank |
| Gold Road Resources |
National Australia and Gold Road Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Australia and Gold Road
The main advantage of trading using opposite National Australia and Gold Road positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Australia position performs unexpectedly, Gold Road 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 Gold Road will offset losses from the drop in Gold Road's long position.| National Australia vs. Westpac Banking | National Australia vs. Commonwealth Bank of | National Australia vs. Commonwealth Bank of |
| Gold Road vs. Northern Star Resources | Gold Road vs. Evolution Mining | Gold Road vs. Bluescope Steel | Gold Road vs. Aneka Tambang Tbk |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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