Correlation Between National Australia and Syrah Resources

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

Diversification Opportunities for National Australia and Syrah Resources

-0.46

Correlation Coefficient

National Australia  Syrah Resources

Very good diversification

The 3 months correlation between National and Syrah is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding National Australia Bank and Syrah Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Syrah Resources 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 Syrah Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Syrah Resources has no effect on the direction of National Australia i.e., National Australia and Syrah Resources go up and down completely randomly.

Pair Corralation between National Australia and Syrah Resources

Assuming the 90 days trading horizon National Australia is expected to generate 20.44 times less return on investment than Syrah Resources. But when comparing it to its historical volatility, National Australia Bank is 25.69 times less risky than Syrah Resources. It trades about 0.05 of its potential returns per unit of risk. Syrah Resources is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  25.00  in Syrah Resources on October 23, 2024 and sell it today you would earn a total of  1.00  from holding Syrah Resources or generate 4.0% return on investment over 90 days.

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

National Australia Bank  vs.  Syrah Resources

National Australia Bank

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in National Australia Bank are ranked lower than 4 (%) 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.

Syrah Resources

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Syrah Resources are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Syrah Resources unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with National Australia and Syrah Resources

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

The idea behind National Australia Bank and Syrah Resources 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.