Correlation Between Macquarie Bank and London City
Can any of the company-specific risk be diversified away by investing in both Macquarie Bank and London City 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 Macquarie Bank and London City into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Macquarie Bank Ltd and London City Equities, you can compare the effects of market volatilities on Macquarie Bank and London City 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 Macquarie Bank with a short position of London City. Check out your portfolio center. Please also check ongoing floating volatility patterns of Macquarie Bank and London City.
Diversification Opportunities for Macquarie Bank and London City
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Macquarie and London is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Macquarie Bank Ltd and London City Equities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on London City Equities and Macquarie Bank 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 Macquarie Bank Ltd are associated (or correlated) with London City. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of London City Equities has no effect on the direction of Macquarie Bank i.e., Macquarie Bank and London City go up and down completely randomly.
Pair Corralation between Macquarie Bank and London City
Assuming the 90 days trading horizon Macquarie Bank is expected to generate 12.5 times less return on investment than London City. But when comparing it to its historical volatility, Macquarie Bank Ltd is 4.55 times less risky than London City. It trades about 0.1 of its potential returns per unit of risk. London City Equities is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest 83.00 in London City Equities on October 31, 2024 and sell it today you would earn a total of 4.00 from holding London City Equities or generate 4.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Macquarie Bank Ltd vs. London City Equities
Performance |
| Timeline |
| Macquarie Bank |
| London City Equities |
Macquarie Bank and London City Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Macquarie Bank and London City
The main advantage of trading using opposite Macquarie Bank and London City positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Macquarie Bank position performs unexpectedly, London City 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 London City will offset losses from the drop in London City's long position.| Macquarie Bank vs. ABACUS STORAGE KING | Macquarie Bank vs. Flagship Investments | Macquarie Bank vs. Argo Investments | Macquarie Bank vs. Viva Leisure |
| London City vs. Audio Pixels Holdings | London City vs. Norwest Minerals | London City vs. Lindian Resources | London City vs. Resource Base |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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