Correlation Between Analog Devices and NATIONAL

Can any of the company-specific risk be diversified away by investing in both Analog Devices and NATIONAL 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 Analog Devices and NATIONAL into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Analog Devices and NATIONAL AUSTRALIA BK, you can compare the effects of market volatilities on Analog Devices and NATIONAL 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 Analog Devices with a short position of NATIONAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Analog Devices and NATIONAL.

Diversification Opportunities for Analog Devices and NATIONAL

0.03

Correlation Coefficient

Analog Devices  NATIONAL

Significant diversification

The 3 months correlation between Analog and NATIONAL is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Analog Devices and NATIONAL AUSTRALIA BK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NATIONAL AUSTRALIA and Analog Devices 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 Analog Devices are associated (or correlated) with NATIONAL. 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 has no effect on the direction of Analog Devices i.e., Analog Devices and NATIONAL go up and down completely randomly.

Pair Corralation between Analog Devices and NATIONAL

Considering the 90-day investment horizon Analog Devices is expected to under-perform the NATIONAL. In addition to that, Analog Devices is 4.65 times more volatile than NATIONAL AUSTRALIA BK. It trades about -0.09 of its total potential returns per unit of risk. NATIONAL AUSTRALIA BK is currently generating about -0.2 per unit of volatility. If you would invest  9,919  in NATIONAL AUSTRALIA BK on September 19, 2024 and sell it today you would lose (233.00) from holding NATIONAL AUSTRALIA BK or give up 2.35% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	50.0%
Values	Daily Returns

Analog Devices  vs.  NATIONAL AUSTRALIA BK

Analog Devices

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Analog Devices has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

NATIONAL AUSTRALIA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NATIONAL AUSTRALIA BK has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, NATIONAL is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Analog Devices and NATIONAL

The main advantage of trading using opposite Analog Devices and NATIONAL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Analog Devices position performs unexpectedly, NATIONAL 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 will offset losses from the drop in NATIONAL's long position.

The idea behind Analog Devices and NATIONAL AUSTRALIA BK pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.