Correlation Between First Financial and National Australia

Can any of the company-specific risk be diversified away by investing in both First Financial and National Australia 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 First Financial and National Australia into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between First Financial and National Australia Bank, you can compare the effects of market volatilities on First Financial and National Australia 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 First Financial with a short position of National Australia. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Financial and National Australia.

Diversification Opportunities for First Financial and National Australia

0.0

Correlation Coefficient

First Financial  National Australia

Pay attention - limited upside

The 3 months correlation between First and National is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding First Financial and National Australia Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Australia Bank and First Financial 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 First Financial are associated (or correlated) with National Australia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Australia Bank has no effect on the direction of First Financial i.e., First Financial and National Australia go up and down completely randomly.

Pair Corralation between First Financial and National Australia

If you would invest (100.00) in National Australia Bank on October 1, 2024 and sell it today you would earn a total of  100.00  from holding National Australia Bank or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

First Financial  vs.  National Australia Bank

First Financial

Risk-Adjusted Performance

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Modest

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

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 weak 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.

Pair Trading with First Financial and National Australia

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

The idea behind First Financial and National Australia Bank 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 Transaction History module to view history of all your transactions and understand their impact on performance.