Correlation Between Macquarie and Resource Base
Can any of the company-specific risk be diversified away by investing in both Macquarie and Resource Base 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 Resource Base into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Macquarie Group and Resource Base, you can compare the effects of market volatilities on Macquarie and Resource Base 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 Resource Base. Check out your portfolio center. Please also check ongoing floating volatility patterns of Macquarie and Resource Base.
Diversification Opportunities for Macquarie and Resource Base
-0.46 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Macquarie and Resource is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Macquarie Group and Resource Base in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Resource Base 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 Resource Base. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Resource Base has no effect on the direction of Macquarie i.e., Macquarie and Resource Base go up and down completely randomly.
Pair Corralation between Macquarie and Resource Base
Assuming the 90 days trading horizon Macquarie Group is expected to generate 0.26 times more return on investment than Resource Base. However, Macquarie Group is 3.89 times less risky than Resource Base. It trades about 0.11 of its potential returns per unit of risk. Resource Base is currently generating about -0.05 per unit of risk. If you would invest 17,792 in Macquarie Group on August 25, 2024 and sell it today you would earn a total of 5,365 from holding Macquarie Group or generate 30.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Macquarie Group vs. Resource Base
Performance |
| Timeline |
| Macquarie Group |
| Resource Base |
Macquarie and Resource Base Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Macquarie and Resource Base
The main advantage of trading using opposite Macquarie and Resource Base positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Macquarie position performs unexpectedly, Resource Base 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 Resource Base will offset losses from the drop in Resource Base's long position.| Macquarie vs. Argo Investments | Macquarie vs. REGAL ASIAN INVESTMENTS | Macquarie vs. Platinum Asia Investments | Macquarie vs. COAST ENTERTAINMENT HOLDINGS |
| Resource Base vs. Northern Star Resources | Resource Base vs. Evolution Mining | Resource Base vs. Bluescope Steel | Resource Base vs. Sandfire Resources NL |
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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