Correlation Between National Australia and Macquarie
Can any of the company-specific risk be diversified away by investing in both National Australia and Macquarie 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 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 Group, you can compare the effects of market volatilities on National Australia and Macquarie 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. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Australia and Macquarie.
Diversification Opportunities for National Australia and Macquarie
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between National and Macquarie is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding National Australia Bank and Macquarie Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Macquarie Group 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. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Macquarie Group has no effect on the direction of National Australia i.e., National Australia and Macquarie go up and down completely randomly.
Pair Corralation between National Australia and Macquarie
Assuming the 90 days trading horizon National Australia Bank is expected to under-perform the Macquarie. But the stock apears to be less risky and, when comparing its historical volatility, National Australia Bank is 1.27 times less risky than Macquarie. The stock trades about -0.01 of its potential returns per unit of risk. The Macquarie Group is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 22,984 in Macquarie Group on August 27, 2024 and sell it today you would earn a total of 173.00 from holding Macquarie Group or generate 0.75% 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 Group
Performance |
| Timeline |
| National Australia Bank |
| Macquarie Group |
National Australia and Macquarie Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Australia and Macquarie
The main advantage of trading using opposite National Australia and Macquarie positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Australia position performs unexpectedly, Macquarie 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 will offset losses from the drop in Macquarie's long position.| National Australia vs. Origin Energy | National Australia vs. Insurance Australia Group | National Australia vs. Hotel Property Investments | National Australia vs. Ecofibre |
| Macquarie vs. AUB Group | Macquarie vs. Auckland International Airport | Macquarie vs. Contact Energy | Macquarie vs. South32 |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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