Correlation Between Magellan Financial and EP Financial
Can any of the company-specific risk be diversified away by investing in both Magellan Financial and EP 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 EP 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 EP Financial Group, you can compare the effects of market volatilities on Magellan Financial and EP 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 EP Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Magellan Financial and EP Financial.
Diversification Opportunities for Magellan Financial and EP Financial
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Magellan and EP1 is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Magellan Financial Group and EP Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EP 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 EP Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EP Financial Group has no effect on the direction of Magellan Financial i.e., Magellan Financial and EP Financial go up and down completely randomly.
Pair Corralation between Magellan Financial and EP Financial
Assuming the 90 days trading horizon Magellan Financial Group is expected to under-perform the EP Financial. But the stock apears to be less risky and, when comparing its historical volatility, Magellan Financial Group is 1.24 times less risky than EP Financial. The stock trades about -0.08 of its potential returns per unit of risk. The EP Financial Group is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 49.00 in EP Financial Group on August 25, 2024 and sell it today you would earn a total of 3.00 from holding EP Financial Group or generate 6.12% 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. EP Financial Group
Performance |
| Timeline |
| Magellan Financial |
| EP Financial Group |
Magellan Financial and EP Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Magellan Financial and EP Financial
The main advantage of trading using opposite Magellan Financial and EP Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Magellan Financial position performs unexpectedly, EP 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 EP Financial will offset losses from the drop in EP 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 |
| EP Financial vs. National Australia Bank | EP Financial vs. National Australia Bank | EP Financial vs. Westpac Banking | EP Financial vs. National Australia Bank |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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