Correlation Between Macquarie Technology and Challenger

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

Diversification Opportunities for Macquarie Technology and Challenger

-0.17

Correlation Coefficient

Macquarie Technology  Challenger

Good diversification

The 3 months correlation between Macquarie and Challenger is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Macquarie Technology Group and Challenger in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Challenger 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 Challenger. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Challenger has no effect on the direction of Macquarie Technology i.e., Macquarie Technology and Challenger go up and down completely randomly.

Pair Corralation between Macquarie Technology and Challenger

Assuming the 90 days trading horizon Macquarie Technology Group is expected to generate 0.69 times more return on investment than Challenger. However, Macquarie Technology Group is 1.44 times less risky than Challenger. It trades about 0.16 of its potential returns per unit of risk. Challenger is currently generating about -0.09 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 Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Macquarie Technology Group  vs.  Challenger

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.

Challenger

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Challenger has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Macquarie Technology and Challenger

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

The idea behind Macquarie Technology Group and Challenger 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.