Correlation Between Macquarie and Mystate

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

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

Diversification Opportunities for Macquarie and Mystate

0.02

Correlation Coefficient

Macquarie  Mystate

Significant diversification

The 3 months correlation between Macquarie and Mystate is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Macquarie Group and Mystate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mystate 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 Mystate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mystate has no effect on the direction of Macquarie i.e., Macquarie and Mystate go up and down completely randomly.

Pair Corralation between Macquarie and Mystate

Assuming the 90 days trading horizon Macquarie Group is expected to under-perform the Mystate. But the stock apears to be less risky and, when comparing its historical volatility, Macquarie Group is 1.08 times less risky than Mystate. The stock trades about -0.05 of its potential returns per unit of risk. The Mystate is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  389.00  in Mystate on September 26, 2024 and sell it today you would earn a total of  57.00  from holding Mystate or generate 14.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	97.67%
Values	Daily Returns

Macquarie Group  vs.  Mystate

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 current stock price uproar, may contribute to short-horizon losses for the private investors.

Mystate

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Mystate are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Mystate unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Macquarie and Mystate

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

The idea behind Macquarie Group and Mystate 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.