Correlation Between Charter Hall and National Australia

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

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

Diversification Opportunities for Charter Hall and National Australia

-0.54

Correlation Coefficient

Charter Hall  National Australia

Excellent diversification

The 3 months correlation between Charter and National is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Charter Hall Retail 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 Charter Hall 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 Charter Hall Retail 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 Charter Hall i.e., Charter Hall and National Australia go up and down completely randomly.

Pair Corralation between Charter Hall and National Australia

Assuming the 90 days trading horizon Charter Hall Retail is expected to under-perform the National Australia. In addition to that, Charter Hall is 3.95 times more volatile than National Australia Bank. It trades about -0.16 of its total potential returns per unit of risk. National Australia Bank is currently generating about 0.06 per unit of volatility. If you would invest  10,304  in National Australia Bank on September 12, 2024 and sell it today you would earn a total of  96.00  from holding National Australia Bank or generate 0.93% return on investment over 90 days.

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

Charter Hall Retail  vs.  National Australia Bank

Charter Hall Retail

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Charter Hall Retail has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

National Australia Bank

Risk-Adjusted Performance

4 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in National Australia Bank are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, National Australia is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Charter Hall and National Australia

The main advantage of trading using opposite Charter Hall and National Australia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Charter Hall 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 Charter Hall Retail 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.