Correlation Between BSP Financial and Macquarie Bank Ltd

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

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

Diversification Opportunities for BSP Financial and Macquarie Bank Ltd

0.75

Correlation Coefficient

BSP Financial  Macquarie Bank Ltd

Poor diversification

The 3 months correlation between BSP and Macquarie is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding BSP Financial Group and Macquarie Bank Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Macquarie Bank Ltd and BSP Financial 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 BSP Financial Group are associated (or correlated) with Macquarie Bank Ltd. 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 Ltd has no effect on the direction of BSP Financial i.e., BSP Financial and Macquarie Bank Ltd go up and down completely randomly.

Pair Corralation between BSP Financial and Macquarie Bank Ltd

Assuming the 90 days trading horizon BSP Financial Group is expected to generate 9.83 times more return on investment than Macquarie Bank Ltd. However, BSP Financial is 9.83 times more volatile than Macquarie Bank Ltd. It trades about 0.14 of its potential returns per unit of risk. Macquarie Bank Ltd is currently generating about 0.09 per unit of risk. If you would invest  648.00  in BSP Financial Group on December 30, 2024 and sell it today you would earn a total of  114.00  from holding BSP Financial Group or generate 17.59% return on investment over 90 days.

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

BSP Financial Group  vs.  Macquarie Bank Ltd

BSP Financial Group

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BSP Financial Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain essential indicators, BSP Financial unveiled solid returns over the last few months and may actually be approaching a breakup point.

Macquarie Bank Ltd

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Macquarie Bank Ltd are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Macquarie Bank Ltd is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with BSP Financial and Macquarie Bank Ltd

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

The idea behind BSP Financial Group 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.