Correlation Between Premier Investments and Macquarie Technology

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

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

Diversification Opportunities for Premier Investments and Macquarie Technology

0.53

Correlation Coefficient

Premier Investments  Macquarie Technology

Very weak diversification

The 3 months correlation between Premier and Macquarie is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Premier Investments and Macquarie Technology Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Macquarie Technology and Premier Investments 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 Premier Investments are associated (or correlated) with Macquarie Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Macquarie Technology has no effect on the direction of Premier Investments i.e., Premier Investments and Macquarie Technology go up and down completely randomly.

Pair Corralation between Premier Investments and Macquarie Technology

Assuming the 90 days trading horizon Premier Investments is expected to generate 1.07 times more return on investment than Macquarie Technology. However, Premier Investments is 1.07 times more volatile than Macquarie Technology Group. It trades about -0.05 of its potential returns per unit of risk. Macquarie Technology Group is currently generating about -0.19 per unit of risk. If you would invest  3,389  in Premier Investments on September 20, 2024 and sell it today you would lose (62.00) from holding Premier Investments or give up 1.83% of portfolio value over 90 days.

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

Premier Investments  vs.  Macquarie Technology Group

Premier Investments

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Premier Investments has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Premier Investments is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Macquarie Technology

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Macquarie Technology Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Macquarie Technology is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Premier Investments and Macquarie Technology

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

The idea behind Premier Investments and Macquarie Technology Group 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.