Correlation Between Magellan Financial and Auswide Bank

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

By analyzing existing cross correlation between Magellan Financial Group and Auswide Bank, you can compare the effects of market volatilities on Magellan Financial and Auswide Bank 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 Magellan Financial with a short position of Auswide Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Magellan Financial and Auswide Bank.

Diversification Opportunities for Magellan Financial and Auswide Bank

0.54

Correlation Coefficient

Magellan Financial  Auswide Bank

Very weak diversification

The 3 months correlation between Magellan and Auswide is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Magellan Financial Group and Auswide Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Auswide Bank and Magellan Financial 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 Magellan Financial Group are associated (or correlated) with Auswide Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Auswide Bank has no effect on the direction of Magellan Financial i.e., Magellan Financial and Auswide Bank go up and down completely randomly.

Pair Corralation between Magellan Financial and Auswide Bank

Assuming the 90 days trading horizon Magellan Financial Group is expected to under-perform the Auswide Bank. But the stock apears to be less risky and, when comparing its historical volatility, Magellan Financial Group is 2.98 times less risky than Auswide Bank. The stock trades about -0.19 of its potential returns per unit of risk. The Auswide Bank is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  440.00  in Auswide Bank on October 9, 2024 and sell it today you would earn a total of  27.00  from holding Auswide Bank or generate 6.14% return on investment over 90 days.

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

Magellan Financial Group  vs.  Auswide Bank

Magellan Financial

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Magellan Financial Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Magellan Financial is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Auswide Bank

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Auswide Bank are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Auswide Bank unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Magellan Financial and Auswide Bank

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

The idea behind Magellan Financial Group and Auswide Bank 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.