Correlation Between Magellan Financial and Australian Bond
Can any of the company-specific risk be diversified away by investing in both Magellan Financial and Australian Bond 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 Australian Bond 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 Australian Bond Exchange, you can compare the effects of market volatilities on Magellan Financial and Australian Bond 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 Australian Bond. Check out your portfolio center. Please also check ongoing floating volatility patterns of Magellan Financial and Australian Bond.
Diversification Opportunities for Magellan Financial and Australian Bond
-0.54 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Magellan and Australian is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Magellan Financial Group and Australian Bond Exchange in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Australian Bond Exchange 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 Australian Bond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Australian Bond Exchange has no effect on the direction of Magellan Financial i.e., Magellan Financial and Australian Bond go up and down completely randomly.
Pair Corralation between Magellan Financial and Australian Bond
Assuming the 90 days trading horizon Magellan Financial is expected to generate 9.15 times less return on investment than Australian Bond. But when comparing it to its historical volatility, Magellan Financial Group is 3.66 times less risky than Australian Bond. It trades about 0.05 of its potential returns per unit of risk. Australian Bond Exchange is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 2.80 in Australian Bond Exchange on September 1, 2024 and sell it today you would earn a total of 0.40 from holding Australian Bond Exchange or generate 14.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Magellan Financial Group vs. Australian Bond Exchange
Performance |
| Timeline |
| Magellan Financial |
| Australian Bond Exchange |
Magellan Financial and Australian Bond Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Magellan Financial and Australian Bond
The main advantage of trading using opposite Magellan Financial and Australian Bond positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Magellan Financial position performs unexpectedly, Australian Bond 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 Australian Bond will offset losses from the drop in Australian Bond's long position.| Magellan Financial vs. WA1 Resources | Magellan Financial vs. Predictive Discovery | Magellan Financial vs. Cooper Metals | Magellan Financial vs. OD6 Metals |
| Australian Bond vs. Srj Technologies Group | Australian Bond vs. Hutchison Telecommunications | Australian Bond vs. Hansen Technologies | Australian Bond vs. Beston Global Food |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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