Correlation Between Macquarie Technology and Australian Dollar

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

Diversification Opportunities for Macquarie Technology and Australian Dollar

-0.07

Correlation Coefficient

Macquarie Technology  Australian Dollar

Good diversification

The 3 months correlation between Macquarie and Australian is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Macquarie Technology Group and Australian Dollar Currency in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Australian Dollar 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 Australian Dollar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Australian Dollar has no effect on the direction of Macquarie Technology i.e., Macquarie Technology and Australian Dollar go up and down completely randomly.

Pair Corralation between Macquarie Technology and Australian Dollar

Assuming the 90 days trading horizon Macquarie Technology Group is expected to generate 3.58 times more return on investment than Australian Dollar. However, Macquarie Technology is 3.58 times more volatile than Australian Dollar Currency. It trades about -0.01 of its potential returns per unit of risk. Australian Dollar Currency is currently generating about -0.02 per unit of risk. If you would invest  8,539  in Macquarie Technology Group on October 23, 2024 and sell it today you would lose (22.00) from holding Macquarie Technology Group or give up 0.26% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	94.74%
Values	Daily Returns

Macquarie Technology Group  vs.  Australian Dollar Currency

Pair Trading with Macquarie Technology and Australian Dollar

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

The idea behind Macquarie Technology Group and Australian Dollar Currency 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.