Correlation Between National Australia and Wam Leaders
Can any of the company-specific risk be diversified away by investing in both National Australia and Wam Leaders 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 Wam Leaders 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 Wam Leaders, you can compare the effects of market volatilities on National Australia and Wam Leaders 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 Wam Leaders. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Australia and Wam Leaders.
Diversification Opportunities for National Australia and Wam Leaders
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between National and Wam is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding National Australia Bank and Wam Leaders in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wam Leaders 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 Wam Leaders. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wam Leaders has no effect on the direction of National Australia i.e., National Australia and Wam Leaders go up and down completely randomly.
Pair Corralation between National Australia and Wam Leaders
Assuming the 90 days trading horizon National Australia Bank is expected to generate 0.31 times more return on investment than Wam Leaders. However, National Australia Bank is 3.2 times less risky than Wam Leaders. It trades about 0.1 of its potential returns per unit of risk. Wam Leaders is currently generating about -0.01 per unit of risk. If you would invest 9,535 in National Australia Bank on August 31, 2024 and sell it today you would earn a total of 1,089 from holding National Australia Bank or generate 11.42% 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. Wam Leaders
Performance |
| Timeline |
| National Australia Bank |
| Wam Leaders |
National Australia and Wam Leaders Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Australia and Wam Leaders
The main advantage of trading using opposite National Australia and Wam Leaders positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Australia position performs unexpectedly, Wam Leaders 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 Wam Leaders will offset losses from the drop in Wam Leaders' long position.| National Australia vs. MA Financial Group | National Australia vs. Commonwealth Bank of | National Australia vs. Auswide Bank | National Australia vs. Carawine Resources Limited |
| Wam Leaders vs. Charter Hall Education | Wam Leaders vs. Cleanaway Waste Management | Wam Leaders vs. Aussie Broadband | Wam Leaders vs. Australian Agricultural |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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