Correlation Between WM Technology and Macmahon Holdings

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

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

Diversification Opportunities for WM Technology and Macmahon Holdings

-0.59

Correlation Coefficient

WM Technology  Macmahon Holdings

Excellent diversification

The 3 months correlation between MAPSW and Macmahon is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding WM Technology and Macmahon Holdings Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Macmahon Holdings and WM Technology 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 WM Technology are associated (or correlated) with Macmahon Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Macmahon Holdings has no effect on the direction of WM Technology i.e., WM Technology and Macmahon Holdings go up and down completely randomly.

Pair Corralation between WM Technology and Macmahon Holdings

Assuming the 90 days horizon WM Technology is expected to generate 2.74 times more return on investment than Macmahon Holdings. However, WM Technology is 2.74 times more volatile than Macmahon Holdings Limited. It trades about 0.08 of its potential returns per unit of risk. Macmahon Holdings Limited is currently generating about 0.05 per unit of risk. If you would invest  3.51  in WM Technology on September 2, 2024 and sell it today you would earn a total of  0.50  from holding WM Technology or generate 14.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	96.88%
Values	Daily Returns

WM Technology  vs.  Macmahon Holdings Limited

WM Technology

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in WM Technology are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, WM Technology showed solid returns over the last few months and may actually be approaching a breakup point.

Macmahon Holdings

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Macmahon Holdings Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical indicators, Macmahon Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with WM Technology and Macmahon Holdings

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

The idea behind WM Technology and Macmahon Holdings Limited 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.