Correlation Between Macquariefirst and FAM

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

By analyzing existing cross correlation between Macquariefirst Tr Global and FAM, you can compare the effects of market volatilities on Macquariefirst and FAM 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 Macquariefirst with a short position of FAM. Check out your portfolio center. Please also check ongoing floating volatility patterns of Macquariefirst and FAM.

Diversification Opportunities for Macquariefirst and FAM

0.9

Correlation Coefficient

Macquariefirst  FAM

Almost no diversification

The 3 months correlation between Macquariefirst and FAM is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Macquariefirst Tr Global and FAM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FAM and Macquariefirst 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 Macquariefirst Tr Global are associated (or correlated) with FAM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FAM has no effect on the direction of Macquariefirst i.e., Macquariefirst and FAM go up and down completely randomly.

Pair Corralation between Macquariefirst and FAM

Considering the 90-day investment horizon Macquariefirst Tr Global is expected to under-perform the FAM. But the fund apears to be less risky and, when comparing its historical volatility, Macquariefirst Tr Global is 1.13 times less risky than FAM. The fund trades about -0.03 of its potential returns per unit of risk. The FAM is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest  641.00  in FAM on September 4, 2024 and sell it today you would earn a total of  33.00  from holding FAM or generate 5.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	93.33%
Values	Daily Returns

Macquariefirst Tr Global  vs.  FAM

Macquariefirst Tr Global

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Macquariefirst Tr Global has generated negative risk-adjusted returns adding no value to fund investors. In spite of rather sound technical and fundamental indicators, Macquariefirst is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

FAM

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days FAM has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very weak basic indicators, FAM displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Macquariefirst and FAM

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

The idea behind Macquariefirst Tr Global and FAM 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.