Correlation Between National Australia and Intel

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

Diversification Opportunities for National Australia and Intel

-0.61
  Correlation Coefficient

Excellent diversification

The 3 months correlation between National and Intel is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding National Australia Bank and Intel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Intel 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 Intel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Intel has no effect on the direction of National Australia i.e., National Australia and Intel go up and down completely randomly.

Pair Corralation between National Australia and Intel

Assuming the 90 days horizon National Australia is expected to generate 2.62 times less return on investment than Intel. But when comparing it to its historical volatility, National Australia Bank is 4.29 times less risky than Intel. It trades about 0.11 of its potential returns per unit of risk. Intel is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  4,273  in Intel on December 29, 2023 and sell it today you would earn a total of  144.00  from holding Intel or generate 3.37% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

National Australia Bank  vs.  Intel

 Performance 
       Timeline  
National Australia Bank 

Risk-Adjusted Performance

7 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in National Australia Bank are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating fundamental drivers, National Australia may actually be approaching a critical reversion point that can send shares even higher in April 2024.
Intel 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Intel has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

National Australia and Intel Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with National Australia and Intel

The main advantage of trading using opposite National Australia and Intel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Australia position performs unexpectedly, Intel 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 Intel will offset losses from the drop in Intel's long position.
The idea behind National Australia Bank and Intel 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.

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