Correlation Between ASX and Macquarie Bank

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

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

Diversification Opportunities for ASX and Macquarie Bank

0.39

Correlation Coefficient

ASX  Macquarie Bank

Weak diversification

The 3 months correlation between ASX and Macquarie is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding ASX and Macquarie Bank Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Macquarie Bank and ASX 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 ASX are associated (or correlated) with Macquarie Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Macquarie Bank has no effect on the direction of ASX i.e., ASX and Macquarie Bank go up and down completely randomly.

Pair Corralation between ASX and Macquarie Bank

Assuming the 90 days trading horizon ASX is expected to generate 3.99 times more return on investment than Macquarie Bank. However, ASX is 3.99 times more volatile than Macquarie Bank Ltd. It trades about 0.08 of its potential returns per unit of risk. Macquarie Bank Ltd is currently generating about 0.06 per unit of risk. If you would invest  5,753  in ASX on September 23, 2024 and sell it today you would earn a total of  677.00  from holding ASX or generate 11.77% return on investment over 90 days.

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

ASX  vs.  Macquarie Bank Ltd

ASX

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ASX are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, ASX is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Macquarie Bank

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Macquarie Bank Ltd are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Macquarie Bank is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with ASX and Macquarie Bank

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

The idea behind ASX and Macquarie Bank Ltd 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.