Correlation Between National Australia and Magellan Financial
Can any of the company-specific risk be diversified away by investing in both National Australia and Magellan 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 Magellan 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 Magellan Financial Group, you can compare the effects of market volatilities on National Australia and Magellan 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 Magellan Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Australia and Magellan Financial.
Diversification Opportunities for National Australia and Magellan Financial
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between National and Magellan is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding National Australia Bank and Magellan Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magellan Financial 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 Magellan Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Magellan Financial has no effect on the direction of National Australia i.e., National Australia and Magellan Financial go up and down completely randomly.
Pair Corralation between National Australia and Magellan Financial
Assuming the 90 days trading horizon National Australia is expected to generate 5.62 times less return on investment than Magellan Financial. But when comparing it to its historical volatility, National Australia Bank is 8.6 times less risky than Magellan Financial. It trades about 0.07 of its potential returns per unit of risk. Magellan Financial Group is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 745.00 in Magellan Financial Group on November 2, 2024 and sell it today you would earn a total of 393.00 from holding Magellan Financial Group or generate 52.75% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
National Australia Bank vs. Magellan Financial Group
Performance |
Timeline |
National Australia Bank |
Magellan Financial |
National Australia and Magellan Financial Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with National Australia and Magellan Financial
The main advantage of trading using opposite National Australia and Magellan Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Australia position performs unexpectedly, Magellan 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 Magellan Financial will offset losses from the drop in Magellan Financial's long position.National Australia vs. Fisher Paykel Healthcare | National Australia vs. Ambertech | National Australia vs. Sports Entertainment Group | National Australia vs. Event Hospitality and |
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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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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