Correlation Between Australian Unity and Magellan Financial

Can any of the company-specific risk be diversified away by investing in both Australian Unity and Magellan Financial 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 Australian Unity and Magellan Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Australian Unity Office and Magellan Financial Group, you can compare the effects of market volatilities on Australian Unity and Magellan Financial 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 Australian Unity with a short position of Magellan Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Australian Unity and Magellan Financial.

Diversification Opportunities for Australian Unity and Magellan Financial

-0.49

Correlation Coefficient

Australian Unity  Magellan Financial

Very good diversification

The 3 months correlation between Australian and Magellan is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Australian Unity Office and Magellan Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magellan Financial and Australian Unity 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 Australian Unity Office are associated (or correlated) with Magellan Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Magellan Financial has no effect on the direction of Australian Unity i.e., Australian Unity and Magellan Financial go up and down completely randomly.

Pair Corralation between Australian Unity and Magellan Financial

Assuming the 90 days trading horizon Australian Unity Office is expected to under-perform the Magellan Financial. But the stock apears to be less risky and, when comparing its historical volatility, Australian Unity Office is 1.99 times less risky than Magellan Financial. The stock trades about -0.12 of its potential returns per unit of risk. The Magellan Financial Group is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  922.00  in Magellan Financial Group on September 4, 2024 and sell it today you would earn a total of  149.00  from holding Magellan Financial Group or generate 16.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

Australian Unity Office  vs.  Magellan Financial Group

Australian Unity Office

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Australian Unity Office 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.

Magellan Financial

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Magellan Financial Group are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, Magellan Financial unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Australian Unity and Magellan Financial

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

The idea behind Australian Unity Office and Magellan Financial Group 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.