Correlation Between Ecofibre and Macquarie
Can any of the company-specific risk be diversified away by investing in both Ecofibre and Macquarie 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 Ecofibre and Macquarie into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ecofibre and Macquarie Group, you can compare the effects of market volatilities on Ecofibre and Macquarie 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 Ecofibre with a short position of Macquarie. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ecofibre and Macquarie.
Diversification Opportunities for Ecofibre and Macquarie
Significant diversification
The 3 months correlation between Ecofibre and Macquarie is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Ecofibre and Macquarie Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Macquarie Group and Ecofibre 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 Ecofibre are associated (or correlated) with Macquarie. 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 Ecofibre i.e., Ecofibre and Macquarie go up and down completely randomly.
Pair Corralation between Ecofibre and Macquarie
Assuming the 90 days trading horizon Ecofibre is expected to under-perform the Macquarie. In addition to that, Ecofibre is 5.95 times more volatile than Macquarie Group. It trades about -0.02 of its total potential returns per unit of risk. Macquarie Group is currently generating about 0.06 per unit of volatility. If you would invest 15,995 in Macquarie Group on September 26, 2024 and sell it today you would earn a total of 6,318 from holding Macquarie Group or generate 39.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ecofibre vs. Macquarie Group
Performance |
| Timeline |
| Ecofibre |
| Macquarie Group |
Ecofibre and Macquarie Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ecofibre and Macquarie
The main advantage of trading using opposite Ecofibre and Macquarie positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ecofibre position performs unexpectedly, Macquarie 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 will offset losses from the drop in Macquarie's long position.| Ecofibre vs. Energy Resources | Ecofibre vs. 88 Energy | Ecofibre vs. Amani Gold | Ecofibre vs. A1 Investments Resources |
| Macquarie vs. Westpac Banking | Macquarie vs. Ecofibre | Macquarie vs. iShares Global Healthcare | Macquarie vs. Adriatic Metals Plc |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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