Correlation Between National Australia and Block
Can any of the company-specific risk be diversified away by investing in both National Australia and Block 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 Block 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 Block Inc, you can compare the effects of market volatilities on National Australia and Block 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 Block. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Australia and Block.
Diversification Opportunities for National Australia and Block
-0.17 | Correlation Coefficient |
Good diversification
The 3 months correlation between National and Block is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding National Australia Bank and Block Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Block Inc 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 Block. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Block Inc has no effect on the direction of National Australia i.e., National Australia and Block go up and down completely randomly.
Pair Corralation between National Australia and Block
Assuming the 90 days trading horizon National Australia is expected to generate 10.01 times less return on investment than Block. But when comparing it to its historical volatility, National Australia Bank is 14.19 times less risky than Block. It trades about 0.04 of its potential returns per unit of risk. Block Inc is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 14,351 in Block Inc on September 24, 2024 and sell it today you would earn a total of 153.00 from holding Block Inc or generate 1.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
National Australia Bank vs. Block Inc
Performance |
| Timeline |
| National Australia Bank |
| Block Inc |
National Australia and Block Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Australia and Block
The main advantage of trading using opposite National Australia and Block positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Australia position performs unexpectedly, Block 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 Block will offset losses from the drop in Block's long position.| National Australia vs. Westpac Banking | National Australia vs. Credit Clear | National Australia vs. Bravura Solutions | National Australia vs. Brainchip Holdings |
| Block vs. Westpac Banking | Block vs. National Australia Bank | Block vs. National Australia Bank | Block 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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