Correlation Between Infomedia and National Australia

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

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

Diversification Opportunities for Infomedia and National Australia

-0.74

Correlation Coefficient

Infomedia  National Australia

Pay attention - limited upside

The 3 months correlation between Infomedia and National is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Infomedia 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 Infomedia 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 Infomedia 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 Infomedia i.e., Infomedia and National Australia go up and down completely randomly.

Pair Corralation between Infomedia and National Australia

Assuming the 90 days trading horizon Infomedia is expected to under-perform the National Australia. In addition to that, Infomedia is 10.99 times more volatile than National Australia Bank. It trades about -0.12 of its total potential returns per unit of risk. National Australia Bank is currently generating about 0.15 per unit of volatility. If you would invest  10,373  in National Australia Bank on September 3, 2024 and sell it today you would earn a total of  251.00  from holding National Australia Bank or generate 2.42% return on investment over 90 days.

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

Infomedia  vs.  National Australia Bank

Infomedia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Infomedia has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's primary indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

National Australia Bank

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in National Australia Bank are ranked lower than 11 (%) 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 Infomedia and National Australia

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