Correlation Between Wam Leaders and National Australia
Can any of the company-specific risk be diversified away by investing in both Wam Leaders 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 Wam Leaders and National Australia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wam Leaders and National Australia Bank, you can compare the effects of market volatilities on Wam Leaders 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 Wam Leaders with a short position of National Australia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wam Leaders and National Australia.
Diversification Opportunities for Wam Leaders and National Australia
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Wam and National is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Wam Leaders 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 Wam Leaders 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 Wam Leaders 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 Wam Leaders i.e., Wam Leaders and National Australia go up and down completely randomly.
Pair Corralation between Wam Leaders and National Australia
Assuming the 90 days trading horizon Wam Leaders is expected to under-perform the National Australia. But the stock apears to be less risky and, when comparing its historical volatility, Wam Leaders is 1.14 times less risky than National Australia. The stock trades about -0.34 of its potential returns per unit of risk. The National Australia Bank is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 10,600 in National Australia Bank on August 28, 2024 and sell it today you would lose (39.00) from holding National Australia Bank or give up 0.37% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wam Leaders vs. National Australia Bank
Performance |
| Timeline |
| Wam Leaders |
| National Australia Bank |
Wam Leaders and National Australia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wam Leaders and National Australia
The main advantage of trading using opposite Wam Leaders and National Australia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wam Leaders 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.| Wam Leaders vs. National Australia Bank | Wam Leaders vs. National Australia Bank | Wam Leaders vs. Westpac Banking | Wam Leaders vs. National Australia Bank |
| National Australia vs. Origin Energy | National Australia vs. Insurance Australia Group | National Australia vs. Hotel Property Investments | National Australia vs. Ecofibre |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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