Correlation Between Macquarie and BSP Financial

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

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

Diversification Opportunities for Macquarie and BSP Financial

-0.46

Correlation Coefficient

Macquarie  BSP Financial

Very good diversification

The 3 months correlation between Macquarie and BSP is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Macquarie Group and BSP Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BSP Financial Group and Macquarie 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 are associated (or correlated) with BSP Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BSP Financial Group has no effect on the direction of Macquarie i.e., Macquarie and BSP Financial go up and down completely randomly.

Pair Corralation between Macquarie and BSP Financial

Assuming the 90 days trading horizon Macquarie Group is expected to under-perform the BSP Financial. But the stock apears to be less risky and, when comparing its historical volatility, Macquarie Group is 1.29 times less risky than BSP Financial. The stock trades about -0.09 of its potential returns per unit of risk. The BSP Financial Group is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  639.00  in BSP Financial Group on December 27, 2024 and sell it today you would earn a total of  128.00  from holding BSP Financial Group or generate 20.03% return on investment over 90 days.

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

Macquarie Group  vs.  BSP Financial Group

Macquarie Group

Risk-Adjusted Performance

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 latest uncertain performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

BSP Financial Group

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BSP Financial Group are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain essential indicators, BSP Financial unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Macquarie and BSP Financial

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

The idea behind Macquarie Group and BSP Financial 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 Transaction History module to view history of all your transactions and understand their impact on performance.