Correlation Between National Australia and Stelar Metals

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

Diversification Opportunities for National Australia and Stelar Metals

-0.59

Correlation Coefficient

National Australia  Stelar Metals

Excellent diversification

The 3 months correlation between National and Stelar is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding National Australia Bank and Stelar Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stelar Metals 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 Stelar Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stelar Metals has no effect on the direction of National Australia i.e., National Australia and Stelar Metals go up and down completely randomly.

Pair Corralation between National Australia and Stelar Metals

Assuming the 90 days trading horizon National Australia Bank is expected to generate 0.05 times more return on investment than Stelar Metals. However, National Australia Bank is 19.5 times less risky than Stelar Metals. It trades about 0.01 of its potential returns per unit of risk. Stelar Metals is currently generating about -0.03 per unit of risk. If you would invest  10,461  in National Australia Bank on September 2, 2024 and sell it today you would earn a total of  14.00  from holding National Australia Bank or generate 0.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

National Australia Bank  vs.  Stelar Metals

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. Despite somewhat strong basic indicators, National Australia is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Stelar Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Stelar Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's fundamental drivers remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with National Australia and Stelar Metals

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

The idea behind National Australia Bank and Stelar Metals 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 Commodity Directory module to find actively traded commodities issued by global exchanges.