Correlation Between Magellan Financial and Alpha HPA
Can any of the company-specific risk be diversified away by investing in both Magellan Financial and Alpha HPA 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 Magellan Financial and Alpha HPA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Magellan Financial Group and Alpha HPA, you can compare the effects of market volatilities on Magellan Financial and Alpha HPA 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 Magellan Financial with a short position of Alpha HPA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Magellan Financial and Alpha HPA.
Diversification Opportunities for Magellan Financial and Alpha HPA
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Magellan and Alpha is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Magellan Financial Group and Alpha HPA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alpha HPA and Magellan Financial 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 Magellan Financial Group are associated (or correlated) with Alpha HPA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alpha HPA has no effect on the direction of Magellan Financial i.e., Magellan Financial and Alpha HPA go up and down completely randomly.
Pair Corralation between Magellan Financial and Alpha HPA
Assuming the 90 days trading horizon Magellan Financial is expected to generate 1.3 times less return on investment than Alpha HPA. But when comparing it to its historical volatility, Magellan Financial Group is 1.36 times less risky than Alpha HPA. It trades about 0.04 of its potential returns per unit of risk. Alpha HPA is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 69.00 in Alpha HPA on September 5, 2024 and sell it today you would earn a total of 33.00 from holding Alpha HPA or generate 47.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
Magellan Financial Group vs. Alpha HPA
Performance |
| Timeline |
| Magellan Financial |
| Alpha HPA |
Magellan Financial and Alpha HPA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Magellan Financial and Alpha HPA
The main advantage of trading using opposite Magellan Financial and Alpha HPA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Magellan Financial position performs unexpectedly, Alpha HPA 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 Alpha HPA will offset losses from the drop in Alpha HPA's long position.| Magellan Financial vs. Westpac Banking | Magellan Financial vs. Ecofibre | Magellan Financial vs. Adriatic Metals Plc | Magellan Financial vs. Australian Dairy Farms |
| Alpha HPA vs. Magellan Financial Group | Alpha HPA vs. Black Rock Mining | Alpha HPA vs. Alto Metals | Alpha HPA vs. Prime Financial 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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