Correlation Between Metals X and Macquarie Bank Ltd

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

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

Diversification Opportunities for Metals X and Macquarie Bank Ltd

0.72

Correlation Coefficient

Metals X  Macquarie Bank Ltd

Poor diversification

The 3 months correlation between Metals and Macquarie is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Metals X and Macquarie Bank Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Macquarie Bank Ltd and Metals X 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 Metals X are associated (or correlated) with Macquarie Bank Ltd. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Macquarie Bank Ltd has no effect on the direction of Metals X i.e., Metals X and Macquarie Bank Ltd go up and down completely randomly.

Pair Corralation between Metals X and Macquarie Bank Ltd

Assuming the 90 days trading horizon Metals X is expected to generate 22.78 times more return on investment than Macquarie Bank Ltd. However, Metals X is 22.78 times more volatile than Macquarie Bank Ltd. It trades about 0.26 of its potential returns per unit of risk. Macquarie Bank Ltd is currently generating about 0.09 per unit of risk. If you would invest  40.00  in Metals X on December 24, 2024 and sell it today you would earn a total of  32.00  from holding Metals X or generate 80.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

Metals X  vs.  Macquarie Bank Ltd

Metals X

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Metals X are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Metals X unveiled solid returns over the last few months and may actually be approaching a breakup point.

Macquarie Bank Ltd

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Macquarie Bank Ltd are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Macquarie Bank Ltd is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Metals X and Macquarie Bank Ltd

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

The idea behind Metals X and Macquarie Bank Ltd 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.