Correlation Between Macmahon Holdings and Ardea Resources

Can any of the company-specific risk be diversified away by investing in both Macmahon Holdings and Ardea Resources 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 Macmahon Holdings and Ardea Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Macmahon Holdings Limited and Ardea Resources Limited, you can compare the effects of market volatilities on Macmahon Holdings and Ardea Resources 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 Macmahon Holdings with a short position of Ardea Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Macmahon Holdings and Ardea Resources.

Diversification Opportunities for Macmahon Holdings and Ardea Resources

-0.61

Correlation Coefficient

Macmahon Holdings  Ardea Resources

Excellent diversification

The 3 months correlation between Macmahon and Ardea is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Macmahon Holdings Limited and Ardea Resources Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ardea Resources and Macmahon Holdings 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 Macmahon Holdings Limited are associated (or correlated) with Ardea Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ardea Resources has no effect on the direction of Macmahon Holdings i.e., Macmahon Holdings and Ardea Resources go up and down completely randomly.

Pair Corralation between Macmahon Holdings and Ardea Resources

Assuming the 90 days horizon Macmahon Holdings Limited is expected to under-perform the Ardea Resources. But the pink sheet apears to be less risky and, when comparing its historical volatility, Macmahon Holdings Limited is 3.28 times less risky than Ardea Resources. The pink sheet trades about -0.18 of its potential returns per unit of risk. The Ardea Resources Limited is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  22.00  in Ardea Resources Limited on December 2, 2024 and sell it today you would earn a total of  4.00  from holding Ardea Resources Limited or generate 18.18% return on investment over 90 days.

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

Macmahon Holdings Limited  vs.  Ardea Resources Limited

Macmahon Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Macmahon Holdings Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's technical indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Ardea Resources

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ardea Resources Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Ardea Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Macmahon Holdings and Ardea Resources

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

The idea behind Macmahon Holdings Limited and Ardea Resources Limited 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.