Correlation Between Macquarie and Cochlear
Can any of the company-specific risk be diversified away by investing in both Macquarie and Cochlear 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 Cochlear into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Macquarie Group and Cochlear, you can compare the effects of market volatilities on Macquarie and Cochlear 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 Cochlear. Check out your portfolio center. Please also check ongoing floating volatility patterns of Macquarie and Cochlear.
Diversification Opportunities for Macquarie and Cochlear
Good diversification
The 3 months correlation between Macquarie and Cochlear is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Macquarie Group and Cochlear in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cochlear 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 Cochlear. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cochlear has no effect on the direction of Macquarie i.e., Macquarie and Cochlear go up and down completely randomly.
Pair Corralation between Macquarie and Cochlear
Assuming the 90 days trading horizon Macquarie Group is expected to generate 0.93 times more return on investment than Cochlear. However, Macquarie Group is 1.07 times less risky than Cochlear. It trades about 0.13 of its potential returns per unit of risk. Cochlear is currently generating about 0.06 per unit of risk. If you would invest 21,219 in Macquarie Group on August 29, 2024 and sell it today you would earn a total of 2,025 from holding Macquarie Group or generate 9.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Macquarie Group vs. Cochlear
Performance |
| Timeline |
| Macquarie Group |
| Cochlear |
Macquarie and Cochlear Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Macquarie and Cochlear
The main advantage of trading using opposite Macquarie and Cochlear positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Macquarie position performs unexpectedly, Cochlear 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 Cochlear will offset losses from the drop in Cochlear's long position.| Macquarie vs. Charter Hall Retail | Macquarie vs. Centaurus Metals | Macquarie vs. Spirit Telecom | Macquarie vs. Perseus Mining |
| Cochlear vs. Hawsons Iron | Cochlear vs. Beston Global Food | Cochlear vs. Queste Communications | Cochlear vs. Charter Hall Education |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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