Correlation Between Macquarie Group and Lend Lease

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

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

Diversification Opportunities for Macquarie Group and Lend Lease

0.71

Correlation Coefficient

Macquarie Group  Lend Lease

Poor diversification

The 3 months correlation between Macquarie and Lend is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Macquarie Group Ltd and Lend Lease Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lend Lease Group and Macquarie Group 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 Macquarie Group Ltd are associated (or correlated) with Lend Lease. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lend Lease Group has no effect on the direction of Macquarie Group i.e., Macquarie Group and Lend Lease go up and down completely randomly.

Pair Corralation between Macquarie Group and Lend Lease

Assuming the 90 days horizon Macquarie Group Ltd is expected to generate 0.4 times more return on investment than Lend Lease. However, Macquarie Group Ltd is 2.48 times less risky than Lend Lease. It trades about 0.07 of its potential returns per unit of risk. Lend Lease Group is currently generating about 0.02 per unit of risk. If you would invest  12,563  in Macquarie Group Ltd on October 25, 2024 and sell it today you would earn a total of  2,422  from holding Macquarie Group Ltd or generate 19.28% return on investment over 90 days.

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

Macquarie Group Ltd  vs.  Lend Lease Group

Macquarie Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Macquarie Group Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong forward-looking signals, Macquarie Group is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Lend Lease Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lend Lease Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Macquarie Group and Lend Lease

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

The idea behind Macquarie Group Ltd and Lend Lease 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.