Correlation Between Macquarie Group and Iodm

Can any of the company-specific risk be diversified away by investing in both Macquarie Group and Iodm 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 Iodm 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 Iodm, you can compare the effects of market volatilities on Macquarie Group and Iodm 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 Iodm. Check out your portfolio center. Please also check ongoing floating volatility patterns of Macquarie Group and Iodm.

Diversification Opportunities for Macquarie Group and Iodm

-0.4

Correlation Coefficient

Macquarie Group  Iodm

Very good diversification

The 3 months correlation between Macquarie and Iodm is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Macquarie Group Ltd and Iodm in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iodm 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 Iodm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iodm has no effect on the direction of Macquarie Group i.e., Macquarie Group and Iodm go up and down completely randomly.

Pair Corralation between Macquarie Group and Iodm

Assuming the 90 days trading horizon Macquarie Group is expected to generate 1.58 times less return on investment than Iodm. But when comparing it to its historical volatility, Macquarie Group Ltd is 19.32 times less risky than Iodm. It trades about 0.2 of its potential returns per unit of risk. Iodm is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  16.00  in Iodm on October 10, 2024 and sell it today you would earn a total of  0.00  from holding Iodm or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.0%
Values	Daily Returns

Macquarie Group Ltd  vs.  Iodm

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.

Iodm

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Iodm are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental indicators, Iodm is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Macquarie Group and Iodm

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

The idea behind Macquarie Group Ltd and Iodm 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.

Check out your portfolio center.

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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.