Correlation Between National Australia and GIBB River

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

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

Diversification Opportunities for National Australia and GIBB River

-0.6

Correlation Coefficient

National Australia  GIBB River

Excellent diversification

The 3 months correlation between National and GIBB is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding National Australia Bank and GIBB River Diamonds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GIBB River Diamonds and National Australia 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 National Australia Bank are associated (or correlated) with GIBB River. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GIBB River Diamonds has no effect on the direction of National Australia i.e., National Australia and GIBB River go up and down completely randomly.

Pair Corralation between National Australia and GIBB River

Assuming the 90 days trading horizon National Australia is expected to generate 1.45 times less return on investment than GIBB River. But when comparing it to its historical volatility, National Australia Bank is 6.23 times less risky than GIBB River. It trades about 0.08 of its potential returns per unit of risk. GIBB River Diamonds is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  6.50  in GIBB River Diamonds on October 23, 2024 and sell it today you would lose (2.60) from holding GIBB River Diamonds or give up 40.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.39%
Values	Daily Returns

National Australia Bank  vs.  GIBB River Diamonds

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. In spite of comparatively stable fundamental drivers, National Australia is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

GIBB River Diamonds

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in GIBB River Diamonds are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental drivers, GIBB River may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with National Australia and GIBB River

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

The idea behind National Australia Bank and GIBB River Diamonds 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..