Correlation Between Macquarie Group and Mercury NZ

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

Diversification Opportunities for Macquarie Group and Mercury NZ

-0.39

Correlation Coefficient

Macquarie Group  Mercury NZ

Very good diversification

The 3 months correlation between Macquarie and Mercury is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Macquarie Group Ltd and Mercury NZ in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mercury NZ 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 Mercury NZ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mercury NZ has no effect on the direction of Macquarie Group i.e., Macquarie Group and Mercury NZ go up and down completely randomly.

Pair Corralation between Macquarie Group and Mercury NZ

Assuming the 90 days trading horizon Macquarie Group is expected to generate 2.19 times less return on investment than Mercury NZ. But when comparing it to its historical volatility, Macquarie Group Ltd is 6.68 times less risky than Mercury NZ. It trades about 0.05 of its potential returns per unit of risk. Mercury NZ is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  516.00  in Mercury NZ on October 23, 2024 and sell it today you would earn a total of  32.00  from holding Mercury NZ or generate 6.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Macquarie Group Ltd  vs.  Mercury NZ

Macquarie Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Macquarie Group Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Mercury NZ

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mercury NZ has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak 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 Mercury NZ

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

The idea behind Macquarie Group Ltd and Mercury NZ 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.