Correlation Between Southern Cross and National Australia
Can any of the company-specific risk be diversified away by investing in both Southern Cross and National Australia 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 Southern Cross and National Australia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Southern Cross Media and National Australia Bank, you can compare the effects of market volatilities on Southern Cross and National Australia 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 Southern Cross with a short position of National Australia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southern Cross and National Australia.
Diversification Opportunities for Southern Cross and National Australia
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Southern and National is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Southern Cross Media and National Australia Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Australia Bank and Southern Cross 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 Southern Cross Media are associated (or correlated) with National Australia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Australia Bank has no effect on the direction of Southern Cross i.e., Southern Cross and National Australia go up and down completely randomly.
Pair Corralation between Southern Cross and National Australia
Assuming the 90 days trading horizon Southern Cross Media is expected to under-perform the National Australia. In addition to that, Southern Cross is 11.01 times more volatile than National Australia Bank. It trades about -0.02 of its total potential returns per unit of risk. National Australia Bank is currently generating about 0.07 per unit of volatility. If you would invest 9,558 in National Australia Bank on October 16, 2024 and sell it today you would earn a total of 859.00 from holding National Australia Bank or generate 8.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Southern Cross Media vs. National Australia Bank
Performance |
| Timeline |
| Southern Cross Media |
| National Australia Bank |
Southern Cross and National Australia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southern Cross and National Australia
The main advantage of trading using opposite Southern Cross and National Australia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southern Cross position performs unexpectedly, National Australia 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 National Australia will offset losses from the drop in National Australia's long position.| Southern Cross vs. DMC Mining | Southern Cross vs. M3 Mining | Southern Cross vs. Sayona Mining | Southern Cross vs. Galena Mining |
| National Australia vs. Diversified United Investment | National Australia vs. Kneomedia | National Australia vs. Pinnacle Investment Management | National Australia vs. Beston Global Food |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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