Correlation Between Treasury Wine and National Australia

Can any of the company-specific risk be diversified away by investing in both Treasury Wine and National Australia 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 Treasury Wine and National Australia into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Treasury Wine Estates and National Australia Bank, you can compare the effects of market volatilities on Treasury Wine and National Australia 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 Treasury Wine with a short position of National Australia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Treasury Wine and National Australia.

Diversification Opportunities for Treasury Wine and National Australia

-0.14

Correlation Coefficient

Treasury Wine  National Australia

Good diversification

The 3 months correlation between Treasury and National is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Treasury Wine Estates and National Australia Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Australia Bank and Treasury Wine 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 Treasury Wine Estates are associated (or correlated) with National Australia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Australia Bank has no effect on the direction of Treasury Wine i.e., Treasury Wine and National Australia go up and down completely randomly.

Pair Corralation between Treasury Wine and National Australia

Assuming the 90 days trading horizon Treasury Wine Estates is expected to under-perform the National Australia. In addition to that, Treasury Wine is 3.36 times more volatile than National Australia Bank. It trades about -0.54 of its total potential returns per unit of risk. National Australia Bank is currently generating about 0.03 per unit of volatility. If you would invest  10,400  in National Australia Bank on October 11, 2024 and sell it today you would earn a total of  16.00  from holding National Australia Bank or generate 0.15% return on investment over 90 days.

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

Treasury Wine Estates  vs.  National Australia Bank

Treasury Wine Estates

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Treasury Wine Estates has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

National Australia Bank

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days National Australia Bank has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Pair Trading with Treasury Wine and National Australia

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

The idea behind Treasury Wine Estates and National Australia Bank 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.