Correlation Between Gold Road and Macquarie Bank
Can any of the company-specific risk be diversified away by investing in both Gold Road and Macquarie Bank 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 Gold Road and Macquarie Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gold Road Resources and Macquarie Bank Limited, you can compare the effects of market volatilities on Gold Road and Macquarie Bank 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 Gold Road with a short position of Macquarie Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gold Road and Macquarie Bank.
Diversification Opportunities for Gold Road and Macquarie Bank
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Gold and Macquarie is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Gold Road Resources and Macquarie Bank Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Macquarie Bank and Gold Road 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 Gold Road Resources are associated (or correlated) with Macquarie Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Macquarie Bank has no effect on the direction of Gold Road i.e., Gold Road and Macquarie Bank go up and down completely randomly.
Pair Corralation between Gold Road and Macquarie Bank
Assuming the 90 days trading horizon Gold Road Resources is expected to generate 4.42 times more return on investment than Macquarie Bank. However, Gold Road is 4.42 times more volatile than Macquarie Bank Limited. It trades about 0.08 of its potential returns per unit of risk. Macquarie Bank Limited is currently generating about 0.06 per unit of risk. If you would invest 164.00 in Gold Road Resources on October 14, 2024 and sell it today you would earn a total of 52.00 from holding Gold Road Resources or generate 31.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Gold Road Resources vs. Macquarie Bank Limited
Performance |
| Timeline |
| Gold Road Resources |
| Macquarie Bank |
Gold Road and Macquarie Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gold Road and Macquarie Bank
The main advantage of trading using opposite Gold Road and Macquarie Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gold Road position performs unexpectedly, Macquarie Bank 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 Bank will offset losses from the drop in Macquarie Bank's long position.| Gold Road vs. Treasury Wine Estates | Gold Road vs. DMC Mining | Gold Road vs. Peel Mining | Gold Road vs. Hansen Technologies |
| Macquarie Bank vs. IDP Education | Macquarie Bank vs. Aussie Broadband | Macquarie Bank vs. Gold Road Resources | Macquarie Bank vs. Retail Food Group |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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