Correlation Between Challenger and Macquarie Technology

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

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

Diversification Opportunities for Challenger and Macquarie Technology

-0.16

Correlation Coefficient

Challenger  Macquarie Technology

Good diversification

The 3 months correlation between Challenger and Macquarie is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Challenger and Macquarie Technology Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Macquarie Technology and Challenger 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 Challenger are associated (or correlated) with Macquarie Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Macquarie Technology has no effect on the direction of Challenger i.e., Challenger and Macquarie Technology go up and down completely randomly.

Pair Corralation between Challenger and Macquarie Technology

Assuming the 90 days trading horizon Challenger is expected to under-perform the Macquarie Technology. But the stock apears to be less risky and, when comparing its historical volatility, Challenger is 1.02 times less risky than Macquarie Technology. The stock trades about -0.07 of its potential returns per unit of risk. The Macquarie Technology Group is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  7,844  in Macquarie Technology Group on September 13, 2024 and sell it today you would earn a total of  721.00  from holding Macquarie Technology Group or generate 9.19% return on investment over 90 days.

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

Challenger  vs.  Macquarie Technology Group

Challenger

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Challenger 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.

Macquarie Technology

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Macquarie Technology Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Macquarie Technology may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Challenger and Macquarie Technology

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

The idea behind Challenger and Macquarie Technology 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.