Correlation Between National Australia and Rand Mining

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

Diversification Opportunities for National Australia and Rand Mining

-0.68

Correlation Coefficient

National Australia  Rand Mining

Excellent diversification

The 3 months correlation between National and Rand is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding National Australia Bank and Rand Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rand Mining 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 Rand Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rand Mining has no effect on the direction of National Australia i.e., National Australia and Rand Mining go up and down completely randomly.

Pair Corralation between National Australia and Rand Mining

Assuming the 90 days trading horizon National Australia Bank is expected to generate 0.09 times more return on investment than Rand Mining. However, National Australia Bank is 10.86 times less risky than Rand Mining. It trades about 0.08 of its potential returns per unit of risk. Rand Mining is currently generating about -0.13 per unit of risk. If you would invest  10,283  in National Australia Bank on October 8, 2024 and sell it today you would earn a total of  122.00  from holding National Australia Bank or generate 1.19% return on investment over 90 days.

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

National Australia Bank  vs.  Rand Mining

National Australia Bank

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in National Australia Bank are ranked lower than 6 (%) 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.

Rand Mining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rand Mining 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 fundamental 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 Rand Mining

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

The idea behind National Australia Bank and Rand Mining 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.