Correlation Between Macquarie and Vulcan Steel

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

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

Diversification Opportunities for Macquarie and Vulcan Steel

0.26

Correlation Coefficient

Macquarie  Vulcan Steel

Modest diversification

The 3 months correlation between Macquarie and Vulcan is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Macquarie Group and Vulcan Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vulcan Steel 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 Vulcan Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vulcan Steel has no effect on the direction of Macquarie i.e., Macquarie and Vulcan Steel go up and down completely randomly.

Pair Corralation between Macquarie and Vulcan Steel

Assuming the 90 days trading horizon Macquarie Group is expected to generate 0.29 times more return on investment than Vulcan Steel. However, Macquarie Group is 3.42 times less risky than Vulcan Steel. It trades about 0.08 of its potential returns per unit of risk. Vulcan Steel is currently generating about 0.02 per unit of risk. If you would invest  22,685  in Macquarie Group on October 11, 2024 and sell it today you would earn a total of  321.00  from holding Macquarie Group or generate 1.42% return on investment over 90 days.

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

Macquarie Group  vs.  Vulcan Steel

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

Vulcan Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vulcan Steel has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's essential indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Macquarie and Vulcan Steel

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

The idea behind Macquarie Group and Vulcan Steel 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.