Correlation Between Hastings Rare and National Australia

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

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

Diversification Opportunities for Hastings Rare and National Australia

0.38

Correlation Coefficient

Hastings Rare  National Australia

Weak diversification

The 3 months correlation between Hastings and National is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Hastings Rare Metals 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 Hastings Rare 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 Hastings Rare Metals 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 Hastings Rare i.e., Hastings Rare and National Australia go up and down completely randomly.

Pair Corralation between Hastings Rare and National Australia

Assuming the 90 days trading horizon Hastings Rare Metals is expected to under-perform the National Australia. In addition to that, Hastings Rare is 15.3 times more volatile than National Australia Bank. It trades about -0.09 of its total potential returns per unit of risk. National Australia Bank is currently generating about 0.07 per unit of volatility. If you would invest  9,492  in National Australia Bank on October 11, 2024 and sell it today you would earn a total of  956.00  from holding National Australia Bank or generate 10.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

Hastings Rare Metals  vs.  National Australia Bank

Hastings Rare Metals

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hastings Rare Metals are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Hastings Rare unveiled solid returns over the last few months and may actually be approaching a breakup point.

National Australia Bank

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in National Australia Bank are ranked lower than 1 (%) 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 current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Hastings Rare and National Australia

The main advantage of trading using opposite Hastings Rare and National Australia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hastings Rare 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 Hastings Rare Metals 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.

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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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.