Correlation Between Magellan Financial and BSP Financial
Can any of the company-specific risk be diversified away by investing in both Magellan Financial and BSP Financial 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 BSP Financial 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 BSP Financial Group, you can compare the effects of market volatilities on Magellan Financial and BSP Financial 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 BSP Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Magellan Financial and BSP Financial.
Diversification Opportunities for Magellan Financial and BSP Financial
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Magellan and BSP is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Magellan Financial Group and BSP Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BSP Financial Group 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 BSP Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BSP Financial Group has no effect on the direction of Magellan Financial i.e., Magellan Financial and BSP Financial go up and down completely randomly.
Pair Corralation between Magellan Financial and BSP Financial
Assuming the 90 days trading horizon Magellan Financial is expected to generate 1.21 times less return on investment than BSP Financial. In addition to that, Magellan Financial is 1.41 times more volatile than BSP Financial Group. It trades about 0.04 of its total potential returns per unit of risk. BSP Financial Group is currently generating about 0.06 per unit of volatility. If you would invest 397.00 in BSP Financial Group on August 29, 2024 and sell it today you would earn a total of 253.00 from holding BSP Financial Group or generate 63.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Magellan Financial Group vs. BSP Financial Group
Performance |
| Timeline |
| Magellan Financial |
| BSP Financial Group |
Magellan Financial and BSP Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Magellan Financial and BSP Financial
The main advantage of trading using opposite Magellan Financial and BSP Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Magellan Financial position performs unexpectedly, BSP Financial 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 BSP Financial will offset losses from the drop in BSP Financial's long position.| Magellan Financial vs. National Australia Bank | Magellan Financial vs. National Australia Bank | Magellan Financial vs. Westpac Banking | Magellan Financial vs. National Australia Bank |
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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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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