Correlation Between Macquarie Bank and Medical Developments

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

Diversification Opportunities for Macquarie Bank and Medical Developments

-0.05

Correlation Coefficient

Macquarie Bank  Medical Developments

Good diversification

The 3 months correlation between Macquarie and Medical is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Macquarie Bank Limited and Medical Developments Internati in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medical Developments 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 Medical Developments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medical Developments has no effect on the direction of Macquarie Bank i.e., Macquarie Bank and Medical Developments go up and down completely randomly.

Pair Corralation between Macquarie Bank and Medical Developments

Assuming the 90 days trading horizon Macquarie Bank Limited is expected to generate 0.32 times more return on investment than Medical Developments. However, Macquarie Bank Limited is 3.15 times less risky than Medical Developments. It trades about 0.11 of its potential returns per unit of risk. Medical Developments International is currently generating about -0.1 per unit of risk. If you would invest  10,255  in Macquarie Bank Limited on September 28, 2024 and sell it today you would earn a total of  145.00  from holding Macquarie Bank Limited or generate 1.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Macquarie Bank Limited  vs.  Medical Developments Internati

Macquarie Bank

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Macquarie Bank Limited are ranked lower than 5 (%) 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.

Medical Developments

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Medical Developments International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Macquarie Bank and Medical Developments

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

The idea behind Macquarie Bank Limited and Medical Developments International 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.