Correlation Between National Australia and Nsx

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Can any of the company-specific risk be diversified away by investing in both National Australia and Nsx 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 Nsx 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 Nsx, you can compare the effects of market volatilities on National Australia and Nsx 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 Nsx. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Australia and Nsx.

Diversification Opportunities for National Australia and Nsx

NationalNsxDiversified AwayNationalNsxDiversified Away100%
-0.02
  Correlation Coefficient

Good diversification

The 3 months correlation between National and Nsx is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding National Australia Bank and Nsx in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nsx 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 Nsx. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nsx has no effect on the direction of National Australia i.e., National Australia and Nsx go up and down completely randomly.

Pair Corralation between National Australia and Nsx

Assuming the 90 days trading horizon National Australia is expected to generate 28.53 times less return on investment than Nsx. But when comparing it to its historical volatility, National Australia Bank is 33.04 times less risky than Nsx. It trades about 0.11 of its potential returns per unit of risk. Nsx is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1.90  in Nsx on September 28, 2024 and sell it today you would earn a total of  0.60  from holding Nsx or generate 31.58% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

National Australia Bank  vs.  Nsx

 Performance 
JavaScript chart by amCharts 3.21.15OctNovDec 020406080100
JavaScript chart by amCharts 3.21.15NABPF NSX
       Timeline  
National Australia Bank 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in National Australia Bank are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, National Australia is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
JavaScript chart by amCharts 3.21.15NovDecDec103103.5104
Nsx 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Nsx are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Nsx unveiled solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15NovDecDec0.020.0250.030.0350.04

National Australia and Nsx Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-0.67-0.44-0.21-0.06640.00.06620.220.450.680.91 1234567
JavaScript chart by amCharts 3.21.15NABPF NSX
       Returns  

Pair Trading with National Australia and Nsx

The main advantage of trading using opposite National Australia and Nsx positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Australia position performs unexpectedly, Nsx 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 Nsx will offset losses from the drop in Nsx's long position.
The idea behind National Australia Bank and Nsx 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.

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