Correlation Between Macquarie Bank and Resource Base

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

Diversification Opportunities for Macquarie Bank and Resource Base

0.11

Correlation Coefficient

Macquarie Bank  Resource Base

Average diversification

The 3 months correlation between Macquarie and Resource is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Macquarie Bank Limited and Resource Base in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Resource Base 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 Resource Base. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Resource Base has no effect on the direction of Macquarie Bank i.e., Macquarie Bank and Resource Base go up and down completely randomly.

Pair Corralation between Macquarie Bank and Resource Base

Assuming the 90 days trading horizon Macquarie Bank Limited is expected to generate 0.12 times more return on investment than Resource Base. However, Macquarie Bank Limited is 8.45 times less risky than Resource Base. It trades about 0.09 of its potential returns per unit of risk. Resource Base is currently generating about -0.03 per unit of risk. If you would invest  10,285  in Macquarie Bank Limited on October 8, 2024 and sell it today you would earn a total of  70.00  from holding Macquarie Bank Limited or generate 0.68% return on investment over 90 days.

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

Macquarie Bank Limited  vs.  Resource Base

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.

Resource Base

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Resource Base are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Resource Base may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Macquarie Bank and Resource Base

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

The idea behind Macquarie Bank Limited and Resource Base 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.