Correlation Between National Australia and Star Minerals

Can any of the company-specific risk be diversified away by investing in both National Australia and Star Minerals 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 Star Minerals 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 Star Minerals, you can compare the effects of market volatilities on National Australia and Star Minerals 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 Star Minerals. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Australia and Star Minerals.

Diversification Opportunities for National Australia and Star Minerals

-0.38

Correlation Coefficient

National Australia  Star Minerals

Very good diversification

The 3 months correlation between National and Star is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding National Australia Bank and Star Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Star Minerals 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 Star Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Star Minerals has no effect on the direction of National Australia i.e., National Australia and Star Minerals go up and down completely randomly.

Pair Corralation between National Australia and Star Minerals

Assuming the 90 days trading horizon National Australia Bank is expected to generate 0.31 times more return on investment than Star Minerals. However, National Australia Bank is 3.25 times less risky than Star Minerals. It trades about -0.13 of its potential returns per unit of risk. Star Minerals is currently generating about -0.09 per unit of risk. If you would invest  3,873  in National Australia Bank on October 8, 2024 and sell it today you would lose (118.00) from holding National Australia Bank or give up 3.05% of portfolio value over 90 days.

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

National Australia Bank  vs.  Star Minerals

National Australia Bank

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in National Australia Bank are ranked lower than 3 (%) 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.

Star Minerals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Star Minerals 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 basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with National Australia and Star Minerals

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

The idea behind National Australia Bank and Star Minerals 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.