Correlation Between Macquarie Technology and High Tech

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

Diversification Opportunities for Macquarie Technology and High Tech

0.31

Correlation Coefficient

Macquarie Technology  High Tech

Weak diversification

The 3 months correlation between Macquarie and High is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Macquarie Technology Group and High Tech Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on High Tech Metals 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 High Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of High Tech Metals has no effect on the direction of Macquarie Technology i.e., Macquarie Technology and High Tech go up and down completely randomly.

Pair Corralation between Macquarie Technology and High Tech

Assuming the 90 days trading horizon Macquarie Technology is expected to generate 3.21 times less return on investment than High Tech. In addition to that, Macquarie Technology is 1.0 times more volatile than High Tech Metals. It trades about 0.07 of its total potential returns per unit of risk. High Tech Metals is currently generating about 0.23 per unit of volatility. If you would invest  15.00  in High Tech Metals on October 10, 2024 and sell it today you would earn a total of  1.00  from holding High Tech Metals or generate 6.67% return on investment over 90 days.

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

Macquarie Technology Group  vs.  High Tech Metals

Macquarie Technology

Risk-Adjusted Performance

5 of 100

Modest

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.

High Tech Metals

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in High Tech Metals are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain primary indicators, High Tech unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Macquarie Technology and High Tech

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

The idea behind Macquarie Technology Group and High Tech Metals 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.