Correlation Between Macquarie and Capitol Health
Can any of the company-specific risk be diversified away by investing in both Macquarie and Capitol Health 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 Macquarie and Capitol Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Macquarie Group and Capitol Health, you can compare the effects of market volatilities on Macquarie and Capitol Health 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 Macquarie with a short position of Capitol Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Macquarie and Capitol Health.
Diversification Opportunities for Macquarie and Capitol Health
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Macquarie and Capitol is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Macquarie Group and Capitol Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capitol Health and Macquarie 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 Macquarie Group are associated (or correlated) with Capitol Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capitol Health has no effect on the direction of Macquarie i.e., Macquarie and Capitol Health go up and down completely randomly.
Pair Corralation between Macquarie and Capitol Health
Assuming the 90 days trading horizon Macquarie is expected to generate 1.47 times less return on investment than Capitol Health. But when comparing it to its historical volatility, Macquarie Group is 2.51 times less risky than Capitol Health. It trades about 0.08 of its potential returns per unit of risk. Capitol Health is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 26.00 in Capitol Health on September 2, 2024 and sell it today you would earn a total of 11.00 from holding Capitol Health or generate 42.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Macquarie Group vs. Capitol Health
Performance |
| Timeline |
| Macquarie Group |
| Capitol Health |
Macquarie and Capitol Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Macquarie and Capitol Health
The main advantage of trading using opposite Macquarie and Capitol Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Macquarie position performs unexpectedly, Capitol Health 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 Capitol Health will offset losses from the drop in Capitol Health's long position.| Macquarie vs. Aneka Tambang Tbk | Macquarie vs. Macquarie Group Ltd | Macquarie vs. Challenger | Macquarie vs. BHP Group Limited |
| Capitol Health vs. Westpac Banking | Capitol Health vs. iShares Global Healthcare | Capitol Health vs. Australian Dairy Farms | Capitol Health vs. Adriatic Metals Plc |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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