Correlation Between Macquarie Group and Alderan Resources

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

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

Diversification Opportunities for Macquarie Group and Alderan Resources

-0.51

Correlation Coefficient

Macquarie Group  Alderan Resources

Excellent diversification

The 3 months correlation between Macquarie and Alderan is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Macquarie Group Ltd and Alderan Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alderan Resources and Macquarie Group 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 Ltd are associated (or correlated) with Alderan Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alderan Resources has no effect on the direction of Macquarie Group i.e., Macquarie Group and Alderan Resources go up and down completely randomly.

Pair Corralation between Macquarie Group and Alderan Resources

Assuming the 90 days trading horizon Macquarie Group Ltd is expected to generate 0.08 times more return on investment than Alderan Resources. However, Macquarie Group Ltd is 12.3 times less risky than Alderan Resources. It trades about 0.06 of its potential returns per unit of risk. Alderan Resources is currently generating about -0.25 per unit of risk. If you would invest  10,376  in Macquarie Group Ltd on September 22, 2024 and sell it today you would earn a total of  74.00  from holding Macquarie Group Ltd or generate 0.71% 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 Ltd  vs.  Alderan Resources

Macquarie Group

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Macquarie Group Ltd are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Macquarie Group is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Alderan Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alderan Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic 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 Group and Alderan Resources

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

The idea behind Macquarie Group Ltd and Alderan Resources 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.