Correlation Between Magellan Financial and Australian Unity
Can any of the company-specific risk be diversified away by investing in both Magellan Financial and Australian Unity 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 Unity 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 Unity Office, you can compare the effects of market volatilities on Magellan Financial and Australian Unity 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 Unity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Magellan Financial and Australian Unity.
Diversification Opportunities for Magellan Financial and Australian Unity
-0.36 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Magellan and Australian is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Magellan Financial Group and Australian Unity Office in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Australian Unity Office 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 Unity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Australian Unity Office has no effect on the direction of Magellan Financial i.e., Magellan Financial and Australian Unity go up and down completely randomly.
Pair Corralation between Magellan Financial and Australian Unity
Assuming the 90 days trading horizon Magellan Financial Group is expected to generate 2.75 times more return on investment than Australian Unity. However, Magellan Financial is 2.75 times more volatile than Australian Unity Office. It trades about 0.12 of its potential returns per unit of risk. Australian Unity Office is currently generating about 0.09 per unit of risk. If you would invest 1,090 in Magellan Financial Group on October 21, 2024 and sell it today you would earn a total of 38.00 from holding Magellan Financial Group or generate 3.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Magellan Financial Group vs. Australian Unity Office
Performance |
| Timeline |
| Magellan Financial |
| Australian Unity Office |
Magellan Financial and Australian Unity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Magellan Financial and Australian Unity
The main advantage of trading using opposite Magellan Financial and Australian Unity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Magellan Financial position performs unexpectedly, Australian Unity 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 Unity will offset losses from the drop in Australian Unity's long position.| Magellan Financial vs. ACDC Metals | Magellan Financial vs. Aeon Metals | Magellan Financial vs. DY6 Metals | Magellan Financial vs. Falcon Metals |
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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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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