Correlation Between Magellan Financial and Xero
Can any of the company-specific risk be diversified away by investing in both Magellan Financial and Xero 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 Xero 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 Xero, you can compare the effects of market volatilities on Magellan Financial and Xero 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 Xero. Check out your portfolio center. Please also check ongoing floating volatility patterns of Magellan Financial and Xero.
Diversification Opportunities for Magellan Financial and Xero
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Magellan and Xero is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Magellan Financial Group and Xero in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xero 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 Xero. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xero has no effect on the direction of Magellan Financial i.e., Magellan Financial and Xero go up and down completely randomly.
Pair Corralation between Magellan Financial and Xero
Assuming the 90 days trading horizon Magellan Financial Group is expected to under-perform the Xero. In addition to that, Magellan Financial is 1.06 times more volatile than Xero. It trades about -0.11 of its total potential returns per unit of risk. Xero is currently generating about 0.01 per unit of volatility. If you would invest 17,099 in Xero on October 11, 2024 and sell it today you would earn a total of 13.00 from holding Xero or generate 0.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Magellan Financial Group vs. Xero
Performance |
| Timeline |
| Magellan Financial |
| Xero |
Magellan Financial and Xero Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Magellan Financial and Xero
The main advantage of trading using opposite Magellan Financial and Xero positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Magellan Financial position performs unexpectedly, Xero 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 Xero will offset losses from the drop in Xero's long position.| Magellan Financial vs. Credit Clear | Magellan Financial vs. ARN Media Limited | Magellan Financial vs. Commonwealth Bank of | Magellan Financial vs. Kkr Credit Income |
| Xero vs. Magellan Financial Group | Xero vs. Bell Financial Group | Xero vs. Bluescope Steel | Xero vs. Kkr Credit Income |
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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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