Correlation Between Macquarie Bank and Recce

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

Diversification Opportunities for Macquarie Bank and Recce

-0.23

Correlation Coefficient

Macquarie Bank  Recce

Very good diversification

The 3 months correlation between Macquarie and Recce is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Macquarie Bank Limited and Recce in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Recce 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 Recce. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Recce has no effect on the direction of Macquarie Bank i.e., Macquarie Bank and Recce go up and down completely randomly.

Pair Corralation between Macquarie Bank and Recce

Assuming the 90 days trading horizon Macquarie Bank is expected to generate 3.48 times less return on investment than Recce. But when comparing it to its historical volatility, Macquarie Bank Limited is 5.86 times less risky than Recce. It trades about 0.01 of its potential returns per unit of risk. Recce is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  49.00  in Recce on October 24, 2024 and sell it today you would lose (1.00) from holding Recce or give up 2.04% 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.  Recce

Macquarie Bank

Risk-Adjusted Performance

0 of 100

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.

Recce

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Macquarie Bank Limited and Recce 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.