Correlation Between National Australia and Western Asset
Can any of the company-specific risk be diversified away by investing in both National Australia and Western Asset 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 Western Asset 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 Western Asset Global, you can compare the effects of market volatilities on National Australia and Western Asset 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 Western Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Australia and Western Asset.
Diversification Opportunities for National Australia and Western Asset
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between National and Western is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding National Australia Bank and Western Asset Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset Global 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 Western Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Asset Global has no effect on the direction of National Australia i.e., National Australia and Western Asset go up and down completely randomly.
Pair Corralation between National Australia and Western Asset
Assuming the 90 days horizon National Australia Bank is expected to generate 2.37 times more return on investment than Western Asset. However, National Australia is 2.37 times more volatile than Western Asset Global. It trades about 0.1 of its potential returns per unit of risk. Western Asset Global is currently generating about 0.01 per unit of risk. If you would invest 1,249 in National Australia Bank on September 5, 2024 and sell it today you would earn a total of 35.00 from holding National Australia Bank or generate 2.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
National Australia Bank vs. Western Asset Global
Performance |
| Timeline |
| National Australia Bank |
| Western Asset Global |
National Australia and Western Asset Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Australia and Western Asset
The main advantage of trading using opposite National Australia and Western Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Australia position performs unexpectedly, Western Asset 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 Western Asset will offset losses from the drop in Western Asset's long position.| National Australia vs. Western Asset Global | National Australia vs. Invesco Trust For | National Australia vs. Logan Ridge Finance | National Australia vs. Invesco Advantage MIT |
| Western Asset vs. Western Asset High | Western Asset vs. Western Asset Global | Western Asset vs. European Equity Closed | Western Asset vs. Doubleline Opportunistic Credit |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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