Correlation Between National Australia and Embark Education
Can any of the company-specific risk be diversified away by investing in both National Australia and Embark Education 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 Embark Education 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 Embark Education Group, you can compare the effects of market volatilities on National Australia and Embark Education 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 Embark Education. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Australia and Embark Education.
Diversification Opportunities for National Australia and Embark Education
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between National and Embark is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding National Australia Bank and Embark Education Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Embark Education 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 Embark Education. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Embark Education has no effect on the direction of National Australia i.e., National Australia and Embark Education go up and down completely randomly.
Pair Corralation between National Australia and Embark Education
Assuming the 90 days trading horizon National Australia is expected to generate 5.87 times less return on investment than Embark Education. But when comparing it to its historical volatility, National Australia Bank is 4.74 times less risky than Embark Education. It trades about 0.08 of its potential returns per unit of risk. Embark Education Group is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 53.00 in Embark Education Group on September 4, 2024 and sell it today you would earn a total of 27.00 from holding Embark Education Group or generate 50.94% 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. Embark Education Group
Performance |
| Timeline |
| National Australia Bank |
| Embark Education |
National Australia and Embark Education Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Australia and Embark Education
The main advantage of trading using opposite National Australia and Embark Education positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Australia position performs unexpectedly, Embark Education 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 Embark Education will offset losses from the drop in Embark Education's long position.| National Australia vs. Ainsworth Game Technology | National Australia vs. Medical Developments International | National Australia vs. Autosports Group | National Australia vs. Bisalloy Steel Group |
| Embark Education vs. National Australia Bank | Embark Education vs. National Australia Bank | Embark Education vs. Westpac Banking | Embark Education 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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