Correlation Between National Australia and Commonwealth Bank

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both National Australia and Commonwealth Bank 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 Commonwealth Bank 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 Commonwealth Bank of, you can compare the effects of market volatilities on National Australia and Commonwealth Bank 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 Commonwealth Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Australia and Commonwealth Bank.

Diversification Opportunities for National Australia and Commonwealth Bank

0.31
  Correlation Coefficient

Weak diversification

The 3 months correlation between National and Commonwealth is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding National Australia Bank and Commonwealth Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commonwealth Bank 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 Commonwealth Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Commonwealth Bank has no effect on the direction of National Australia i.e., National Australia and Commonwealth Bank go up and down completely randomly.

Pair Corralation between National Australia and Commonwealth Bank

Assuming the 90 days trading horizon National Australia is expected to generate 1.86 times less return on investment than Commonwealth Bank. In addition to that, National Australia is 1.44 times more volatile than Commonwealth Bank of. It trades about 0.01 of its total potential returns per unit of risk. Commonwealth Bank of is currently generating about 0.03 per unit of volatility. If you would invest  10,096  in Commonwealth Bank of on September 20, 2024 and sell it today you would earn a total of  94.00  from holding Commonwealth Bank of or generate 0.93% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

National Australia Bank  vs.  Commonwealth Bank of

 Performance 
       Timeline  
National Australia Bank 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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 current stock price disturbance, may contribute to short-term losses for the investors.
Commonwealth Bank 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Commonwealth Bank of are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Commonwealth Bank is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

National Australia and Commonwealth Bank Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with National Australia and Commonwealth Bank

The main advantage of trading using opposite National Australia and Commonwealth Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Australia position performs unexpectedly, Commonwealth Bank 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 Commonwealth Bank will offset losses from the drop in Commonwealth Bank's long position.
The idea behind National Australia Bank and Commonwealth Bank of 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.
Check out your portfolio center.
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.

Other Complementary Tools

Investing Opportunities
Build portfolios using our predefined set of ideas and optimize them against your investing preferences
Idea Breakdown
Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes
Positions Ratings
Determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance
Fundamental Analysis
View fundamental data based on most recent published financial statements
Portfolio Center
All portfolio management and optimization tools to improve performance of your portfolios