Correlation Between Macquarie Bank and AiMedia Technologies

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

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

Diversification Opportunities for Macquarie Bank and AiMedia Technologies

-0.27

Correlation Coefficient

Macquarie Bank  AiMedia Technologies

Very good diversification

The 3 months correlation between Macquarie and AiMedia is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Macquarie Bank Limited and AiMedia Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AiMedia Technologies and Macquarie Bank 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 Limited are associated (or correlated) with AiMedia Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AiMedia Technologies has no effect on the direction of Macquarie Bank i.e., Macquarie Bank and AiMedia Technologies go up and down completely randomly.

Pair Corralation between Macquarie Bank and AiMedia Technologies

Assuming the 90 days trading horizon Macquarie Bank Limited is expected to generate 0.08 times more return on investment than AiMedia Technologies. However, Macquarie Bank Limited is 12.69 times less risky than AiMedia Technologies. It trades about -0.02 of its potential returns per unit of risk. AiMedia Technologies is currently generating about -0.01 per unit of risk. If you would invest  10,343  in Macquarie Bank Limited on December 2, 2024 and sell it today you would lose (63.00) from holding Macquarie Bank Limited or give up 0.61% of portfolio value over 90 days.

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

Macquarie Bank Limited  vs.  AiMedia Technologies

Macquarie Bank

Risk-Adjusted Performance

Very Weak

Over the last 90 days Macquarie Bank Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Macquarie Bank is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

AiMedia Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days AiMedia Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable primary indicators, AiMedia Technologies 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 Bank and AiMedia Technologies

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

The idea behind Macquarie Bank Limited and AiMedia Technologies 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 Global Correlations module to find global opportunities by holding instruments from different markets.