Correlation Between National Australia and Industrial
Can any of the company-specific risk be diversified away by investing in both National Australia and Industrial 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 Industrial 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 Industrial and Commercial, you can compare the effects of market volatilities on National Australia and Industrial 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 Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Australia and Industrial.
Diversification Opportunities for National Australia and Industrial
-0.37 | Correlation Coefficient |
Very good diversification
The 3 months correlation between National and Industrial is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding National Australia Bank and Industrial and Commercial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Industrial and Commercial 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 Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Industrial and Commercial has no effect on the direction of National Australia i.e., National Australia and Industrial go up and down completely randomly.
Pair Corralation between National Australia and Industrial
Assuming the 90 days horizon National Australia is expected to generate 1.18 times less return on investment than Industrial. In addition to that, National Australia is 1.01 times more volatile than Industrial and Commercial. It trades about 0.1 of its total potential returns per unit of risk. Industrial and Commercial is currently generating about 0.12 per unit of volatility. If you would invest 59.00 in Industrial and Commercial on August 30, 2024 and sell it today you would earn a total of 2.00 from holding Industrial and Commercial or generate 3.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
National Australia Bank vs. Industrial and Commercial
Performance |
| Timeline |
| National Australia Bank |
| Industrial and Commercial |
National Australia and Industrial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Australia and Industrial
The main advantage of trading using opposite National Australia and Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Australia position performs unexpectedly, Industrial 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 Industrial will offset losses from the drop in Industrial'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 |
| Industrial vs. ANZ Group Holdings | Industrial vs. National Australia Bank | Industrial vs. Agricultural Bank | Industrial vs. Bank of America |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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