Correlation Between Medibank Private and Macquarie

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

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

Diversification Opportunities for Medibank Private and Macquarie

0.18

Correlation Coefficient

Medibank Private  Macquarie

Average diversification

The 3 months correlation between Medibank and Macquarie is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Medibank Private and Macquarie Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Macquarie Group and Medibank Private 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 Medibank Private are associated (or correlated) with Macquarie. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Macquarie Group has no effect on the direction of Medibank Private i.e., Medibank Private and Macquarie go up and down completely randomly.

Pair Corralation between Medibank Private and Macquarie

Assuming the 90 days trading horizon Medibank Private is expected to generate 2.28 times less return on investment than Macquarie. In addition to that, Medibank Private is 1.04 times more volatile than Macquarie Group. It trades about 0.04 of its total potential returns per unit of risk. Macquarie Group is currently generating about 0.1 per unit of volatility. If you would invest  16,281  in Macquarie Group on October 6, 2024 and sell it today you would earn a total of  6,028  from holding Macquarie Group or generate 37.02% return on investment over 90 days.

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

Medibank Private  vs.  Macquarie Group

Medibank Private

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Medibank Private are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable essential indicators, Medibank Private is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Macquarie Group

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Medibank Private and Macquarie Group 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.