Correlation Between Australia and National Australia

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

By analyzing existing cross correlation between Australia and New and National Australia Bank, you can compare the effects of market volatilities on Australia 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 Australia with a short position of National Australia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Australia and National Australia.

Diversification Opportunities for Australia and National Australia

0.85

Correlation Coefficient

Australia  National Australia

Very poor diversification

The 3 months correlation between Australia and National is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Australia and New 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 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 Australia and New 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 Australia i.e., Australia and National Australia go up and down completely randomly.

Pair Corralation between Australia and National Australia

Assuming the 90 days trading horizon Australia and New is expected to under-perform the National Australia. In addition to that, Australia is 1.12 times more volatile than National Australia Bank. It trades about -0.4 of its total potential returns per unit of risk. National Australia Bank is currently generating about -0.18 per unit of volatility. If you would invest  3,954  in National Australia Bank on September 20, 2024 and sell it today you would lose (155.00) from holding National Australia Bank or give up 3.92% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Australia and New  vs.  National Australia Bank

Australia and New

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Australia and New has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Australia is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

National Australia Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days National Australia Bank has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental drivers, National Australia is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Australia and National Australia

The main advantage of trading using opposite Australia and National Australia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Australia 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.

The idea behind Australia and New and National Australia Bank 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.