Correlation Between Macquarie Group and UPDATE SOFTWARE

Can any of the company-specific risk be diversified away by investing in both Macquarie Group and UPDATE SOFTWARE 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 Macquarie Group and UPDATE SOFTWARE into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Macquarie Group Limited and UPDATE SOFTWARE, you can compare the effects of market volatilities on Macquarie Group and UPDATE SOFTWARE 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 Macquarie Group with a short position of UPDATE SOFTWARE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Macquarie Group and UPDATE SOFTWARE.

Diversification Opportunities for Macquarie Group and UPDATE SOFTWARE

-0.02

Correlation Coefficient

Macquarie Group  UPDATE SOFTWARE

Good diversification

The 3 months correlation between Macquarie and UPDATE is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Macquarie Group Limited and UPDATE SOFTWARE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UPDATE SOFTWARE and Macquarie Group 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 Macquarie Group Limited are associated (or correlated) with UPDATE SOFTWARE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UPDATE SOFTWARE has no effect on the direction of Macquarie Group i.e., Macquarie Group and UPDATE SOFTWARE go up and down completely randomly.

Pair Corralation between Macquarie Group and UPDATE SOFTWARE

Assuming the 90 days horizon Macquarie Group Limited is expected to under-perform the UPDATE SOFTWARE. But the stock apears to be less risky and, when comparing its historical volatility, Macquarie Group Limited is 1.54 times less risky than UPDATE SOFTWARE. The stock trades about -0.23 of its potential returns per unit of risk. The UPDATE SOFTWARE is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  1,604  in UPDATE SOFTWARE on September 27, 2024 and sell it today you would lose (17.00) from holding UPDATE SOFTWARE or give up 1.06% of portfolio value over 90 days.

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

Macquarie Group Limited  vs.  UPDATE SOFTWARE

Macquarie Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Macquarie Group Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Macquarie Group is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

UPDATE SOFTWARE

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in UPDATE SOFTWARE are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, UPDATE SOFTWARE exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Macquarie Group and UPDATE SOFTWARE

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

The idea behind Macquarie Group Limited and UPDATE SOFTWARE 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.