Correlation Between Magellan Financial and Perpetual Credit
Can any of the company-specific risk be diversified away by investing in both Magellan Financial and Perpetual Credit 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 Perpetual Credit 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 Perpetual Credit Income, you can compare the effects of market volatilities on Magellan Financial and Perpetual Credit 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 Perpetual Credit. Check out your portfolio center. Please also check ongoing floating volatility patterns of Magellan Financial and Perpetual Credit.
Diversification Opportunities for Magellan Financial and Perpetual Credit
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Magellan and Perpetual is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Magellan Financial Group and Perpetual Credit Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Perpetual Credit Income 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 Perpetual Credit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Perpetual Credit Income has no effect on the direction of Magellan Financial i.e., Magellan Financial and Perpetual Credit go up and down completely randomly.
Pair Corralation between Magellan Financial and Perpetual Credit
Assuming the 90 days trading horizon Magellan Financial Group is expected to generate 2.13 times more return on investment than Perpetual Credit. However, Magellan Financial is 2.13 times more volatile than Perpetual Credit Income. It trades about 0.1 of its potential returns per unit of risk. Perpetual Credit Income is currently generating about 0.08 per unit of risk. If you would invest 1,002 in Magellan Financial Group on August 30, 2024 and sell it today you would earn a total of 86.00 from holding Magellan Financial Group or generate 8.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Magellan Financial Group vs. Perpetual Credit Income
Performance |
| Timeline |
| Magellan Financial |
| Perpetual Credit Income |
Magellan Financial and Perpetual Credit Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Magellan Financial and Perpetual Credit
The main advantage of trading using opposite Magellan Financial and Perpetual Credit positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Magellan Financial position performs unexpectedly, Perpetual Credit 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 Perpetual Credit will offset losses from the drop in Perpetual Credit's long position.| Magellan Financial vs. Champion Iron | Magellan Financial vs. Ridley | Magellan Financial vs. Peel Mining | Magellan Financial vs. Australian Dairy Farms |
| Perpetual Credit vs. ABACUS STORAGE KING | Perpetual Credit vs. Odyssey Energy | Perpetual Credit vs. Champion Iron | Perpetual Credit vs. Ridley |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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