Correlation Between National Australia and Evolution Mining

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

Diversification Opportunities for National Australia and Evolution Mining

0.15

Correlation Coefficient

National Australia  Evolution Mining

Average diversification

The 3 months correlation between National and Evolution is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding National Australia Bank and Evolution Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evolution Mining 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 Evolution Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evolution Mining has no effect on the direction of National Australia i.e., National Australia and Evolution Mining go up and down completely randomly.

Pair Corralation between National Australia and Evolution Mining

Assuming the 90 days trading horizon National Australia Bank is expected to generate 0.15 times more return on investment than Evolution Mining. However, National Australia Bank is 6.5 times less risky than Evolution Mining. It trades about 0.14 of its potential returns per unit of risk. Evolution Mining is currently generating about -0.06 per unit of risk. If you would invest  10,378  in National Australia Bank on September 25, 2024 and sell it today you would earn a total of  106.00  from holding National Australia Bank or generate 1.02% return on investment over 90 days.

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

National Australia Bank  vs.  Evolution Mining

National Australia Bank

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in National Australia Bank are ranked lower than 5 (%) 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.

Evolution Mining

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Evolution Mining are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Evolution Mining may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with National Australia and Evolution Mining

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

The idea behind National Australia Bank and Evolution Mining 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.