Correlation Between Macquarie and Strickland Metals

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

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

Diversification Opportunities for Macquarie and Strickland Metals

-0.35

Correlation Coefficient

Macquarie  Strickland Metals

Very good diversification

The 3 months correlation between Macquarie and Strickland is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Macquarie Group and Strickland Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Strickland Metals 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 Strickland Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Strickland Metals has no effect on the direction of Macquarie i.e., Macquarie and Strickland Metals go up and down completely randomly.

Pair Corralation between Macquarie and Strickland Metals

Assuming the 90 days trading horizon Macquarie Group is expected to generate 0.27 times more return on investment than Strickland Metals. However, Macquarie Group is 3.71 times less risky than Strickland Metals. It trades about 0.1 of its potential returns per unit of risk. Strickland Metals is currently generating about -0.02 per unit of risk. If you would invest  21,746  in Macquarie Group on September 5, 2024 and sell it today you would earn a total of  1,617  from holding Macquarie Group or generate 7.44% return on investment over 90 days.

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

Macquarie Group  vs.  Strickland Metals

Macquarie Group

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Macquarie Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Macquarie may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Strickland Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Strickland Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable forward-looking signals, Strickland Metals 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 Strickland Metals

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

The idea behind Macquarie Group and Strickland Metals 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.