Correlation Between BANK QLD and NAT BANK

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

By analyzing existing cross correlation between BANK QLD PREF and NAT BANK CPS, you can compare the effects of market volatilities on BANK QLD and NAT 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 BANK QLD with a short position of NAT BANK. Check out your portfolio center. Please also check ongoing floating volatility patterns of BANK QLD and NAT BANK.

Diversification Opportunities for BANK QLD and NAT BANK

0.0

Correlation Coefficient

BANK QLD  NAT BANK

Pay attention - limited upside

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

Pair Corralation between BANK QLD and NAT BANK

If you would invest (100.00) in NAT BANK CPS on October 10, 2024 and sell it today you would earn a total of  100.00  from holding NAT BANK CPS or generate -100.0% return on investment over 90 days.

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

BANK QLD PREF  vs.  NAT BANK CPS

BANK QLD PREF

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BANK QLD PREF has generated negative risk-adjusted returns adding no value to fund investors. In spite of rather sound basic indicators, BANK QLD is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

NAT BANK CPS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NAT BANK CPS has generated negative risk-adjusted returns adding no value to fund investors. Despite somewhat strong basic indicators, NAT BANK is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with BANK QLD and NAT BANK

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

The idea behind BANK QLD PREF and NAT BANK CPS 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.