Correlation Between Banco Bilbao and National Australia

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

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

Diversification Opportunities for Banco Bilbao and National Australia

0.09

Correlation Coefficient

Banco Bilbao  National Australia

Significant diversification

The 3 months correlation between Banco and National is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Banco Bilbao Vizcaya 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 Banco Bilbao 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 Banco Bilbao Vizcaya 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 Banco Bilbao i.e., Banco Bilbao and National Australia go up and down completely randomly.

Pair Corralation between Banco Bilbao and National Australia

Assuming the 90 days horizon Banco Bilbao Vizcaya is expected to generate 0.92 times more return on investment than National Australia. However, Banco Bilbao Vizcaya is 1.08 times less risky than National Australia. It trades about -0.05 of its potential returns per unit of risk. National Australia Bank is currently generating about -0.09 per unit of risk. If you would invest  1,015  in Banco Bilbao Vizcaya on September 12, 2024 and sell it today you would lose (101.00) from holding Banco Bilbao Vizcaya or give up 9.95% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.83%
Values	Daily Returns

Banco Bilbao Vizcaya  vs.  National Australia Bank

Banco Bilbao Vizcaya

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Banco Bilbao Vizcaya has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company 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. Despite fragile performance in the last few months, the Stock's fundamental drivers remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Banco Bilbao and National Australia

The main advantage of trading using opposite Banco Bilbao and National Australia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Banco Bilbao 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 Banco Bilbao Vizcaya 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.