Correlation Between Flagship Investments and National Australia

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

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

Diversification Opportunities for Flagship Investments and National Australia

0.36

Correlation Coefficient

Flagship Investments  National Australia

Weak diversification

The 3 months correlation between Flagship and National is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Flagship Investments 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 Flagship Investments 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 Flagship Investments 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 Flagship Investments i.e., Flagship Investments and National Australia go up and down completely randomly.

Pair Corralation between Flagship Investments and National Australia

Assuming the 90 days trading horizon Flagship Investments is expected to generate 6.06 times more return on investment than National Australia. However, Flagship Investments is 6.06 times more volatile than National Australia Bank. It trades about 0.08 of its potential returns per unit of risk. National Australia Bank is currently generating about 0.04 per unit of risk. If you would invest  200.00  in Flagship Investments on October 7, 2024 and sell it today you would earn a total of  10.00  from holding Flagship Investments or generate 5.0% return on investment over 90 days.

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

Flagship Investments  vs.  National Australia Bank

Flagship Investments

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Flagship Investments are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain forward indicators, Flagship Investments may actually be approaching a critical reversion point that can send shares even higher in February 2025.

National Australia Bank

Risk-Adjusted Performance

4 of 100

Insignificant

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 Flagship Investments and National Australia

The main advantage of trading using opposite Flagship Investments and National Australia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Flagship Investments 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 Flagship Investments 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.