Correlation Between National Australia and Macquarie Bank
Can any of the company-specific risk be diversified away by investing in both National Australia and Macquarie Bank 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 Macquarie Bank 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 Macquarie Bank Limited, you can compare the effects of market volatilities on National Australia and Macquarie Bank 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 Macquarie Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Australia and Macquarie Bank.
Diversification Opportunities for National Australia and Macquarie Bank
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between National and Macquarie is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding National Australia Bank and Macquarie Bank Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Macquarie Bank 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 Macquarie Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Macquarie Bank has no effect on the direction of National Australia i.e., National Australia and Macquarie Bank go up and down completely randomly.
Pair Corralation between National Australia and Macquarie Bank
Assuming the 90 days trading horizon National Australia is expected to generate 1.37 times less return on investment than Macquarie Bank. But when comparing it to its historical volatility, National Australia Bank is 1.59 times less risky than Macquarie Bank. It trades about 0.07 of its potential returns per unit of risk. Macquarie Bank Limited is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 8,931 in Macquarie Bank Limited on August 28, 2024 and sell it today you would earn a total of 1,310 from holding Macquarie Bank Limited or generate 14.67% 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. Macquarie Bank Limited
Performance |
| Timeline |
| National Australia Bank |
| Macquarie Bank |
National Australia and Macquarie Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Australia and Macquarie Bank
The main advantage of trading using opposite National Australia and Macquarie Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Australia position performs unexpectedly, Macquarie Bank 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 Macquarie Bank will offset losses from the drop in Macquarie Bank'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 |
| Macquarie Bank vs. NEWMONT PORATION CDI | Macquarie Bank vs. Ssr Mining | Macquarie Bank vs. Ora Banda Mining | Macquarie Bank vs. Black Cat Syndicate |
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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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