Correlation Between Bank Central and Macquarie Group

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

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

Diversification Opportunities for Bank Central and Macquarie Group

0.31

Correlation Coefficient

Bank Central  Macquarie Group

Weak diversification

The 3 months correlation between Bank and Macquarie is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Bank Central Asia and Macquarie Group Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Macquarie Group and Bank Central 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 Bank Central Asia are associated (or correlated) with Macquarie Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Macquarie Group has no effect on the direction of Bank Central i.e., Bank Central and Macquarie Group go up and down completely randomly.

Pair Corralation between Bank Central and Macquarie Group

Assuming the 90 days horizon Bank Central Asia is expected to under-perform the Macquarie Group. In addition to that, Bank Central is 1.08 times more volatile than Macquarie Group Ltd. It trades about -0.14 of its total potential returns per unit of risk. Macquarie Group Ltd is currently generating about -0.09 per unit of volatility. If you would invest  13,938  in Macquarie Group Ltd on December 21, 2024 and sell it today you would lose (1,255) from holding Macquarie Group Ltd or give up 9.0% of portfolio value over 90 days.

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

Bank Central Asia  vs.  Macquarie Group Ltd

Bank Central Asia

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bank Central Asia has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Macquarie Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Macquarie Group Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's forward-looking signals remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Bank Central and Macquarie Group

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

The idea behind Bank Central Asia and Macquarie Group Ltd 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.