Correlation Between Macquarie Bank and Bisalloy Steel

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

Diversification Opportunities for Macquarie Bank and Bisalloy Steel

0.22

Correlation Coefficient

Macquarie Bank  Bisalloy Steel

Modest diversification

The 3 months correlation between Macquarie and Bisalloy is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Macquarie Bank Limited and Bisalloy Steel Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bisalloy Steel Group 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 Bisalloy Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bisalloy Steel Group has no effect on the direction of Macquarie Bank i.e., Macquarie Bank and Bisalloy Steel go up and down completely randomly.

Pair Corralation between Macquarie Bank and Bisalloy Steel

Assuming the 90 days trading horizon Macquarie Bank is expected to generate 81.35 times less return on investment than Bisalloy Steel. But when comparing it to its historical volatility, Macquarie Bank Limited is 7.65 times less risky than Bisalloy Steel. It trades about 0.01 of its potential returns per unit of risk. Bisalloy Steel Group is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  305.00  in Bisalloy Steel Group on October 7, 2024 and sell it today you would earn a total of  85.00  from holding Bisalloy Steel Group or generate 27.87% return on investment over 90 days.

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

Macquarie Bank Limited  vs.  Bisalloy Steel Group

Macquarie Bank

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Macquarie Bank Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

Bisalloy Steel Group

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bisalloy Steel Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Bisalloy Steel unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Macquarie Bank and Bisalloy Steel

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

The idea behind Macquarie Bank Limited and Bisalloy Steel Group 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.