Correlation Between Macquarie Technology and Aussie Broadband

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

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

Diversification Opportunities for Macquarie Technology and Aussie Broadband

0.01

Correlation Coefficient

Macquarie Technology  Aussie Broadband

Significant diversification

The 3 months correlation between Macquarie and Aussie is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Macquarie Technology Group and Aussie Broadband in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aussie Broadband and Macquarie 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 Macquarie Technology Group are associated (or correlated) with Aussie Broadband. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aussie Broadband has no effect on the direction of Macquarie Technology i.e., Macquarie Technology and Aussie Broadband go up and down completely randomly.

Pair Corralation between Macquarie Technology and Aussie Broadband

Assuming the 90 days trading horizon Macquarie Technology Group is expected to generate 0.68 times more return on investment than Aussie Broadband. However, Macquarie Technology Group is 1.47 times less risky than Aussie Broadband. It trades about 0.16 of its potential returns per unit of risk. Aussie Broadband is currently generating about 0.08 per unit of risk. If you would invest  7,641  in Macquarie Technology Group on September 4, 2024 and sell it today you would earn a total of  1,137  from holding Macquarie Technology Group or generate 14.88% return on investment over 90 days.

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

Macquarie Technology Group  vs.  Aussie Broadband

Macquarie Technology

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Macquarie Technology Group are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Macquarie Technology unveiled solid returns over the last few months and may actually be approaching a breakup point.

Aussie Broadband

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Aussie Broadband are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental drivers, Aussie Broadband may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Macquarie Technology and Aussie Broadband

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

The idea behind Macquarie Technology Group and Aussie Broadband 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.