Correlation Between National Australia and Banco De

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

Diversification Opportunities for National Australia and Banco De

-0.08

Correlation Coefficient

National Australia  Banco De

Good diversification

The 3 months correlation between National and Banco is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding National Australia Bank and Banco de Sabadell in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banco de Sabadell 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 Banco De. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banco de Sabadell has no effect on the direction of National Australia i.e., National Australia and Banco De go up and down completely randomly.

Pair Corralation between National Australia and Banco De

Assuming the 90 days horizon National Australia Bank is expected to under-perform the Banco De. But the pink sheet apears to be less risky and, when comparing its historical volatility, National Australia Bank is 2.18 times less risky than Banco De. The pink sheet trades about -0.14 of its potential returns per unit of risk. The Banco de Sabadell is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  194.00  in Banco de Sabadell on September 24, 2024 and sell it today you would lose (9.00) from holding Banco de Sabadell or give up 4.64% of portfolio value over 90 days.

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

National Australia Bank  vs.  Banco de Sabadell

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 latest abnormal performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Banco de Sabadell

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Banco de Sabadell has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Banco De is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with National Australia and Banco De

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

The idea behind National Australia Bank and Banco de Sabadell 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.