Correlation Between National Australia and Prime Financial
Can any of the company-specific risk be diversified away by investing in both National Australia and Prime 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 Prime 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 Prime Financial Group, you can compare the effects of market volatilities on National Australia and Prime 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 Prime Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Australia and Prime Financial.
Diversification Opportunities for National Australia and Prime Financial
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between National and Prime is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding National Australia Bank and Prime Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prime Financial 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 Prime Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prime Financial Group has no effect on the direction of National Australia i.e., National Australia and Prime Financial go up and down completely randomly.
Pair Corralation between National Australia and Prime Financial
Assuming the 90 days trading horizon National Australia is expected to generate 9.49 times less return on investment than Prime Financial. But when comparing it to its historical volatility, National Australia Bank is 3.14 times less risky than Prime Financial. It trades about 0.02 of its potential returns per unit of risk. Prime Financial Group is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 22.00 in Prime Financial Group on August 30, 2024 and sell it today you would earn a total of 1.00 from holding Prime Financial Group or generate 4.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 97.73% |
| Values | Daily Returns |
National Australia Bank vs. Prime Financial Group
Performance |
| Timeline |
| National Australia Bank |
| Prime Financial Group |
National Australia and Prime Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Australia and Prime Financial
The main advantage of trading using opposite National Australia and Prime Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Australia position performs unexpectedly, Prime 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 Prime Financial will offset losses from the drop in Prime Financial's long position.| National Australia vs. Champion Iron | National Australia vs. Strickland Metals | National Australia vs. Kingsrose Mining | National Australia vs. Tombador Iron |
| Prime Financial vs. Renascor Resources | Prime Financial vs. Venus Metals | Prime Financial vs. Havilah Resources | Prime Financial vs. Asara Resources |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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