Correlation Between Macquarie Bank and Global Health

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

Diversification Opportunities for Macquarie Bank and Global Health

-0.15

Correlation Coefficient

Macquarie Bank  Global Health

Good diversification

The 3 months correlation between Macquarie and Global is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Macquarie Bank Limited and Global Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Health 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 Global Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Health has no effect on the direction of Macquarie Bank i.e., Macquarie Bank and Global Health go up and down completely randomly.

Pair Corralation between Macquarie Bank and Global Health

Assuming the 90 days trading horizon Macquarie Bank is expected to generate 6.05 times less return on investment than Global Health. But when comparing it to its historical volatility, Macquarie Bank Limited is 11.05 times less risky than Global Health. It trades about 0.08 of its potential returns per unit of risk. Global Health is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  11.00  in Global Health on October 2, 2024 and sell it today you would earn a total of  3.00  from holding Global Health or generate 27.27% return on investment over 90 days.

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

Macquarie Bank Limited  vs.  Global Health

Macquarie Bank

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Macquarie Bank Limited are ranked lower than 4 (%) 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.

Global Health

Risk-Adjusted Performance

1 of 100

Weak

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

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

The idea behind Macquarie Bank Limited and Global Health 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.