Correlation Between Macquarie Bank and Collins Foods

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Can any of the company-specific risk be diversified away by investing in both Macquarie Bank and Collins Foods 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 Collins Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Macquarie Bank Limited and Collins Foods, you can compare the effects of market volatilities on Macquarie Bank and Collins Foods 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 Collins Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Macquarie Bank and Collins Foods.

Diversification Opportunities for Macquarie Bank and Collins Foods

0.2
  Correlation Coefficient

Modest diversification

The 3 months correlation between Macquarie and Collins is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Macquarie Bank Limited and Collins Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Collins Foods 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 Limited are associated (or correlated) with Collins Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Collins Foods has no effect on the direction of Macquarie Bank i.e., Macquarie Bank and Collins Foods go up and down completely randomly.

Pair Corralation between Macquarie Bank and Collins Foods

Assuming the 90 days trading horizon Macquarie Bank Limited is expected to generate 0.42 times more return on investment than Collins Foods. However, Macquarie Bank Limited is 2.38 times less risky than Collins Foods. It trades about 0.05 of its potential returns per unit of risk. Collins Foods is currently generating about -0.01 per unit of risk. If you would invest  10,135  in Macquarie Bank Limited on September 12, 2024 and sell it today you would earn a total of  165.00  from holding Macquarie Bank Limited or generate 1.63% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Macquarie Bank Limited  vs.  Collins Foods

 Performance 
       Timeline  
Macquarie Bank 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Macquarie Bank Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Macquarie Bank is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.
Collins Foods 

Risk-Adjusted Performance

0 of 100

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

Macquarie Bank and Collins Foods Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Macquarie Bank and Collins Foods

The main advantage of trading using opposite Macquarie Bank and Collins Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Macquarie Bank position performs unexpectedly, Collins Foods 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 Collins Foods will offset losses from the drop in Collins Foods' long position.
The idea behind Macquarie Bank Limited and Collins Foods 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.
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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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.

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