Correlation Between EROAD and Macquarie Technology
Can any of the company-specific risk be diversified away by investing in both EROAD 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 EROAD and Macquarie Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EROAD and Macquarie Technology Group, you can compare the effects of market volatilities on EROAD 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 EROAD with a short position of Macquarie Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of EROAD and Macquarie Technology.
Diversification Opportunities for EROAD and Macquarie Technology
-0.47 | Correlation Coefficient |
Very good diversification
The 3 months correlation between EROAD and Macquarie is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding EROAD and Macquarie Technology Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Macquarie Technology and EROAD 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 EROAD 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 EROAD i.e., EROAD and Macquarie Technology go up and down completely randomly.
Pair Corralation between EROAD and Macquarie Technology
Assuming the 90 days trading horizon EROAD is expected to generate 1.11 times less return on investment than Macquarie Technology. In addition to that, EROAD is 2.77 times more volatile than Macquarie Technology Group. It trades about 0.02 of its total potential returns per unit of risk. Macquarie Technology Group is currently generating about 0.05 per unit of volatility. If you would invest 5,825 in Macquarie Technology Group on August 27, 2024 and sell it today you would earn a total of 2,849 from holding Macquarie Technology Group or generate 48.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
EROAD vs. Macquarie Technology Group
Performance |
| Timeline |
| EROAD |
| Macquarie Technology |
EROAD and Macquarie Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EROAD and Macquarie Technology
The main advantage of trading using opposite EROAD and Macquarie Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EROAD 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.| EROAD vs. Aneka Tambang Tbk | EROAD vs. BHP Group Limited | EROAD vs. Rio Tinto | EROAD vs. Macquarie Group Ltd |
| Macquarie Technology vs. National Australia Bank | Macquarie Technology vs. National Australia Bank | Macquarie Technology vs. Westpac Banking | Macquarie Technology vs. National Australia Bank |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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