Correlation Between Macquarie Technology and EROAD

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

Diversification Opportunities for Macquarie Technology and EROAD

-0.35

Correlation Coefficient

Macquarie Technology  EROAD

Very good diversification

The 3 months correlation between Macquarie and EROAD is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Macquarie Technology Group and EROAD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EROAD 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 EROAD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EROAD has no effect on the direction of Macquarie Technology i.e., Macquarie Technology and EROAD go up and down completely randomly.

Pair Corralation between Macquarie Technology and EROAD

Assuming the 90 days trading horizon Macquarie Technology is expected to generate 1.86 times less return on investment than EROAD. But when comparing it to its historical volatility, Macquarie Technology Group is 2.75 times less risky than EROAD. It trades about 0.06 of its potential returns per unit of risk. EROAD is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  68.00  in EROAD on September 27, 2024 and sell it today you would earn a total of  39.00  from holding EROAD or generate 57.35% 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.  EROAD

Macquarie Technology

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Macquarie Technology Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Macquarie Technology is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

EROAD

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in EROAD are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental indicators, EROAD 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 EROAD

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

The idea behind Macquarie Technology Group and EROAD 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.

Check out your portfolio center.

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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.