Correlation Between Macquarie and Rea Group

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

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

Diversification Opportunities for Macquarie and Rea Group

0.52

Correlation Coefficient

Macquarie  Rea Group

Very weak diversification

The 3 months correlation between Macquarie and Rea is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Macquarie Group and Rea Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rea 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 Rea Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rea Group has no effect on the direction of Macquarie i.e., Macquarie and Rea Group go up and down completely randomly.

Pair Corralation between Macquarie and Rea Group

Assuming the 90 days trading horizon Macquarie Group is expected to under-perform the Rea Group. But the stock apears to be less risky and, when comparing its historical volatility, Macquarie Group is 1.44 times less risky than Rea Group. The stock trades about -0.09 of its potential returns per unit of risk. The Rea Group is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  23,395  in Rea Group on December 30, 2024 and sell it today you would lose (700.00) from holding Rea Group or give up 2.99% of portfolio value over 90 days.

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

Macquarie Group  vs.  Rea 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.

Rea Group

Risk-Adjusted Performance

Very Weak

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

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

The idea behind Macquarie Group and Rea 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.