Correlation Between National Australia and Commonwealth Bank
Can any of the company-specific risk be diversified away by investing in both National Australia and Commonwealth Bank 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 Commonwealth Bank 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 Commonwealth Bank of, you can compare the effects of market volatilities on National Australia and Commonwealth Bank 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 Commonwealth Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Australia and Commonwealth Bank.
Diversification Opportunities for National Australia and Commonwealth Bank
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between National and Commonwealth is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding National Australia Bank and Commonwealth Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commonwealth Bank 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 Commonwealth Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Commonwealth Bank has no effect on the direction of National Australia i.e., National Australia and Commonwealth Bank go up and down completely randomly.
Pair Corralation between National Australia and Commonwealth Bank
Assuming the 90 days horizon National Australia is expected to generate 2.13 times less return on investment than Commonwealth Bank. In addition to that, National Australia is 1.24 times more volatile than Commonwealth Bank of. It trades about 0.12 of its total potential returns per unit of risk. Commonwealth Bank of is currently generating about 0.32 per unit of volatility. If you would invest 9,415 in Commonwealth Bank of on August 24, 2024 and sell it today you would earn a total of 747.00 from holding Commonwealth Bank of or generate 7.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
National Australia Bank vs. Commonwealth Bank of
Performance |
| Timeline |
| National Australia Bank |
| Commonwealth Bank |
National Australia and Commonwealth Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Australia and Commonwealth Bank
The main advantage of trading using opposite National Australia and Commonwealth Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Australia position performs unexpectedly, Commonwealth Bank 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 Commonwealth Bank will offset losses from the drop in Commonwealth Bank's long position.| National Australia vs. China Construction Bank | National Australia vs. Bank of America | National Australia vs. ANZ Group Holdings | National Australia vs. Bank of America |
| Commonwealth Bank vs. Svenska Handelsbanken PK | Commonwealth Bank vs. ANZ Group Holdings | Commonwealth Bank vs. Westpac Banking | Commonwealth Bank 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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