Correlation Between Macquarie Technology and Carawine Resources

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

Diversification Opportunities for Macquarie Technology and Carawine Resources

0.77

Correlation Coefficient

Macquarie Technology  Carawine Resources

Poor diversification

The 3 months correlation between Macquarie and Carawine is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Macquarie Technology Group and Carawine Resources Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carawine Resources 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 Carawine Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carawine Resources has no effect on the direction of Macquarie Technology i.e., Macquarie Technology and Carawine Resources go up and down completely randomly.

Pair Corralation between Macquarie Technology and Carawine Resources

Assuming the 90 days trading horizon Macquarie Technology is expected to generate 1.21 times less return on investment than Carawine Resources. But when comparing it to its historical volatility, Macquarie Technology Group is 2.21 times less risky than Carawine Resources. It trades about 0.17 of its potential returns per unit of risk. Carawine Resources Limited is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  9.50  in Carawine Resources Limited on September 5, 2024 and sell it today you would earn a total of  1.50  from holding Carawine Resources Limited or generate 15.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

Macquarie Technology Group  vs.  Carawine Resources Limited

Macquarie Technology

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Macquarie Technology Group are ranked lower than 13 (%) 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.

Carawine Resources

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Carawine Resources Limited are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Carawine Resources unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Macquarie Technology and Carawine Resources

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

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