Correlation Between Macquarie Technology and Australia

Can any of the company-specific risk be diversified away by investing in both Macquarie Technology and Australia 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 Australia 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 Australia and New, you can compare the effects of market volatilities on Macquarie Technology and Australia 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 Australia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Macquarie Technology and Australia.

Diversification Opportunities for Macquarie Technology and Australia

0.29

Correlation Coefficient

Macquarie Technology  Australia

Modest diversification

The 3 months correlation between Macquarie and Australia is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Macquarie Technology Group and Australia and New in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Australia and New 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 Australia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Australia and New has no effect on the direction of Macquarie Technology i.e., Macquarie Technology and Australia go up and down completely randomly.

Pair Corralation between Macquarie Technology and Australia

Assuming the 90 days trading horizon Macquarie Technology Group is expected to generate 1.26 times more return on investment than Australia. However, Macquarie Technology is 1.26 times more volatile than Australia and New. It trades about -0.02 of its potential returns per unit of risk. Australia and New is currently generating about -0.18 per unit of risk. If you would invest  8,883  in Macquarie Technology Group on October 8, 2024 and sell it today you would lose (54.00) from holding Macquarie Technology Group or give up 0.61% of portfolio value over 90 days.

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

Macquarie Technology Group  vs.  Australia and New

Macquarie Technology

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Macquarie Technology Group are ranked lower than 5 (%) 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 February 2025.

Australia and New

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Australia and New has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Australia is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Macquarie Technology and Australia

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

The idea behind Macquarie Technology Group and Australia and New 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.