Correlation Between Macquarie and Future Generation
Can any of the company-specific risk be diversified away by investing in both Macquarie and Future Generation 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 Future Generation into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Macquarie Group and Future Generation Australia, you can compare the effects of market volatilities on Macquarie and Future Generation 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 Future Generation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Macquarie and Future Generation.
Diversification Opportunities for Macquarie and Future Generation
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Macquarie and Future is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Macquarie Group and Future Generation Australia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Future Generation 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 Future Generation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Future Generation has no effect on the direction of Macquarie i.e., Macquarie and Future Generation go up and down completely randomly.
Pair Corralation between Macquarie and Future Generation
Assuming the 90 days trading horizon Macquarie Group is expected to generate 1.2 times more return on investment than Future Generation. However, Macquarie is 1.2 times more volatile than Future Generation Australia. It trades about 0.06 of its potential returns per unit of risk. Future Generation Australia is currently generating about 0.05 per unit of risk. If you would invest 17,171 in Macquarie Group on November 29, 2024 and sell it today you would earn a total of 5,907 from holding Macquarie Group or generate 34.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
Macquarie Group vs. Future Generation Australia
Performance |
| Timeline |
| Macquarie Group |
| Future Generation |
Macquarie and Future Generation Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Macquarie and Future Generation
The main advantage of trading using opposite Macquarie and Future Generation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Macquarie position performs unexpectedly, Future Generation 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 Future Generation will offset losses from the drop in Future Generation's long position.| Macquarie vs. Chalice Mining Limited | Macquarie vs. Sports Entertainment Group | Macquarie vs. Iron Road | Macquarie vs. Maggie Beer Holdings |
| Future Generation vs. IRIS Metals | Future Generation vs. Sky Metals | Future Generation vs. Computershare | Future Generation vs. Stelar Metals |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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