Correlation Between National Australia and Kip McGrath

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

Diversification Opportunities for National Australia and Kip McGrath

0.19

Correlation Coefficient

National Australia  Kip McGrath

Average diversification

The 3 months correlation between National and Kip is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding National Australia Bank and Kip McGrath Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kip McGrath Education 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 Kip McGrath. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kip McGrath Education has no effect on the direction of National Australia i.e., National Australia and Kip McGrath go up and down completely randomly.

Pair Corralation between National Australia and Kip McGrath

Assuming the 90 days trading horizon National Australia Bank is expected to generate 0.09 times more return on investment than Kip McGrath. However, National Australia Bank is 11.63 times less risky than Kip McGrath. It trades about 0.07 of its potential returns per unit of risk. Kip McGrath Education is currently generating about -0.03 per unit of risk. If you would invest  10,353  in National Australia Bank on December 30, 2024 and sell it today you would earn a total of  79.00  from holding National Australia Bank or generate 0.76% return on investment over 90 days.

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

National Australia Bank  vs.  Kip McGrath Education

National Australia Bank

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in National Australia Bank are ranked lower than 5 (%) 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.

Kip McGrath Education

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kip McGrath Education has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Kip McGrath 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 Kip McGrath

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

The idea behind National Australia Bank and Kip McGrath Education 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.