Correlation Between National Australia and Wildcat Resources

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

Diversification Opportunities for National Australia and Wildcat Resources

-0.46

Correlation Coefficient

National Australia  Wildcat Resources

Very good diversification

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

Pair Corralation between National Australia and Wildcat Resources

Assuming the 90 days trading horizon National Australia Bank is expected to generate 0.04 times more return on investment than Wildcat Resources. However, National Australia Bank is 23.99 times less risky than Wildcat Resources. It trades about 0.08 of its potential returns per unit of risk. Wildcat Resources is currently generating about -0.01 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	Very Weak
Accuracy	100.0%
Values	Daily Returns

National Australia Bank  vs.  Wildcat Resources

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 current stock price disturbance, may contribute to short-term losses for the investors.

Wildcat Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wildcat Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Wildcat Resources is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with National Australia and Wildcat Resources

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

The idea behind National Australia Bank and Wildcat 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.

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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.