Correlation Between Macquarie Bank and G8 Education
Can any of the company-specific risk be diversified away by investing in both Macquarie Bank and G8 Education 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 G8 Education 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 G8 Education, you can compare the effects of market volatilities on Macquarie Bank and G8 Education 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 G8 Education. Check out your portfolio center. Please also check ongoing floating volatility patterns of Macquarie Bank and G8 Education.
Diversification Opportunities for Macquarie Bank and G8 Education
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Macquarie and GEM is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Macquarie Bank Limited and G8 Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on G8 Education 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 G8 Education. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of G8 Education has no effect on the direction of Macquarie Bank i.e., Macquarie Bank and G8 Education go up and down completely randomly.
Pair Corralation between Macquarie Bank and G8 Education
Assuming the 90 days trading horizon Macquarie Bank Limited is expected to under-perform the G8 Education. But the stock apears to be less risky and, when comparing its historical volatility, Macquarie Bank Limited is 2.43 times less risky than G8 Education. The stock trades about -0.09 of its potential returns per unit of risk. The G8 Education is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 135.00 in G8 Education on August 29, 2024 and sell it today you would lose (1.00) from holding G8 Education or give up 0.74% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Macquarie Bank Limited vs. G8 Education
Performance |
| Timeline |
| Macquarie Bank |
| G8 Education |
Macquarie Bank and G8 Education Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Macquarie Bank and G8 Education
The main advantage of trading using opposite Macquarie Bank and G8 Education positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Macquarie Bank position performs unexpectedly, G8 Education 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 G8 Education will offset losses from the drop in G8 Education's long position.| Macquarie Bank vs. Ssr Mining | Macquarie Bank vs. Ora Banda Mining | Macquarie Bank vs. Black Cat Syndicate | Macquarie Bank vs. Champion Iron |
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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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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