Correlation Between Macquarie Bank Ltd and Syrah Resources

Can any of the company-specific risk be diversified away by investing in both Macquarie Bank Ltd and Syrah 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 Bank Ltd and Syrah Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Macquarie Bank Ltd and Syrah Resources, you can compare the effects of market volatilities on Macquarie Bank Ltd and Syrah 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 Bank Ltd with a short position of Syrah Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Macquarie Bank Ltd and Syrah Resources.

Diversification Opportunities for Macquarie Bank Ltd and Syrah Resources

0.7

Correlation Coefficient

Macquarie Bank Ltd  Syrah Resources

Poor diversification

The 3 months correlation between Macquarie and Syrah is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Macquarie Bank Ltd and Syrah Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Syrah Resources and Macquarie Bank Ltd 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 Bank Ltd are associated (or correlated) with Syrah Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Syrah Resources has no effect on the direction of Macquarie Bank Ltd i.e., Macquarie Bank Ltd and Syrah Resources go up and down completely randomly.

Pair Corralation between Macquarie Bank Ltd and Syrah Resources

Assuming the 90 days trading horizon Macquarie Bank Ltd is expected to generate 49.1 times less return on investment than Syrah Resources. But when comparing it to its historical volatility, Macquarie Bank Ltd is 23.65 times less risky than Syrah Resources. It trades about 0.1 of its potential returns per unit of risk. Syrah Resources is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  18.00  in Syrah Resources on December 24, 2024 and sell it today you would earn a total of  12.00  from holding Syrah Resources or generate 66.67% return on investment over 90 days.

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

Macquarie Bank Ltd  vs.  Syrah Resources

Macquarie Bank Ltd

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Macquarie Bank Ltd are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Macquarie Bank Ltd is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Syrah Resources

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Syrah Resources are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Syrah Resources unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Macquarie Bank Ltd and Syrah Resources

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

The idea behind Macquarie Bank Ltd and Syrah Resources 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.