Correlation Between Magellan Financial and Midway
Can any of the company-specific risk be diversified away by investing in both Magellan Financial and Midway 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 Midway 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 Midway, you can compare the effects of market volatilities on Magellan Financial and Midway 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 Midway. Check out your portfolio center. Please also check ongoing floating volatility patterns of Magellan Financial and Midway.
Diversification Opportunities for Magellan Financial and Midway
-0.02 | Correlation Coefficient |
Good diversification
The 3 months correlation between Magellan and Midway is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Magellan Financial Group and Midway in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Midway 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 Midway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Midway has no effect on the direction of Magellan Financial i.e., Magellan Financial and Midway go up and down completely randomly.
Pair Corralation between Magellan Financial and Midway
Assuming the 90 days trading horizon Magellan Financial is expected to generate 1.83 times less return on investment than Midway. But when comparing it to its historical volatility, Magellan Financial Group is 2.34 times less risky than Midway. It trades about 0.07 of its potential returns per unit of risk. Midway is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 80.00 in Midway on September 4, 2024 and sell it today you would earn a total of 45.00 from holding Midway or generate 56.25% 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. Midway
Performance |
| Timeline |
| Magellan Financial |
| Midway |
Magellan Financial and Midway Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Magellan Financial and Midway
The main advantage of trading using opposite Magellan Financial and Midway positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Magellan Financial position performs unexpectedly, Midway 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 Midway will offset losses from the drop in Midway's long position.| Magellan Financial vs. Westpac Banking | Magellan Financial vs. Ecofibre | Magellan Financial vs. Adriatic Metals Plc | Magellan Financial vs. Australian Dairy Farms |
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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 CEOs Directory module to screen CEOs from public companies around the world.
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