Correlation Between Carawine Resources and Macquarie Technology

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

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

Diversification Opportunities for Carawine Resources and Macquarie Technology

0.77

Correlation Coefficient

Carawine Resources  Macquarie Technology

Poor diversification

The 3 months correlation between Carawine and Macquarie is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Carawine Resources Limited and Macquarie Technology Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Macquarie Technology and Carawine Resources 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 Carawine Resources Limited 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 Carawine Resources i.e., Carawine Resources and Macquarie Technology go up and down completely randomly.

Pair Corralation between Carawine Resources and Macquarie Technology

Assuming the 90 days trading horizon Carawine Resources Limited is expected to generate 2.34 times more return on investment than Macquarie Technology. However, Carawine Resources is 2.34 times more volatile than Macquarie Technology Group. It trades about 0.05 of its potential returns per unit of risk. Macquarie Technology Group is currently generating about 0.1 per unit of risk. If you would invest  9.10  in Carawine Resources Limited on September 13, 2024 and sell it today you would earn a total of  0.60  from holding Carawine Resources Limited or generate 6.59% return on investment over 90 days.

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

Carawine Resources Limited  vs.  Macquarie Technology Group

Carawine Resources

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Carawine Resources Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Carawine Resources may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 Carawine Resources and Macquarie Technology

The main advantage of trading using opposite Carawine Resources and Macquarie Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Carawine Resources 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 Carawine Resources Limited 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.