Correlation Between National Australia and ANZ Group

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

Diversification Opportunities for National Australia and ANZ Group

0.33

Correlation Coefficient

National Australia  ANZ Group

Weak diversification

The 3 months correlation between National and ANZ is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding National Australia Bank and ANZ Group Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ANZ Group Holdings 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 ANZ Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ANZ Group Holdings has no effect on the direction of National Australia i.e., National Australia and ANZ Group go up and down completely randomly.

Pair Corralation between National Australia and ANZ Group

Assuming the 90 days trading horizon National Australia Bank is expected to generate 1.51 times more return on investment than ANZ Group. However, National Australia is 1.51 times more volatile than ANZ Group Holdings. It trades about -0.01 of its potential returns per unit of risk. ANZ Group Holdings is currently generating about -0.14 per unit of risk. If you would invest  10,366  in National Australia Bank on September 16, 2024 and sell it today you would lose (6.00) from holding National Australia Bank or give up 0.06% of portfolio value over 90 days.

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

National Australia Bank  vs.  ANZ Group Holdings

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. 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.

ANZ Group Holdings

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ANZ Group Holdings are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, ANZ Group is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with National Australia and ANZ Group

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

The idea behind National Australia Bank and ANZ Group Holdings 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.