Correlation Between Macquarie and Rea
Can any of the company-specific risk be diversified away by investing in both Macquarie and Rea 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 Rea into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Macquarie Group and Rea Group, you can compare the effects of market volatilities on Macquarie and Rea 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 Rea. Check out your portfolio center. Please also check ongoing floating volatility patterns of Macquarie and Rea.
Diversification Opportunities for Macquarie and Rea
Weak diversification
The 3 months correlation between Macquarie and Rea is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Macquarie Group and Rea Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rea Group 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 Rea. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rea Group has no effect on the direction of Macquarie i.e., Macquarie and Rea go up and down completely randomly.
Pair Corralation between Macquarie and Rea
Assuming the 90 days trading horizon Macquarie is expected to generate 1.39 times less return on investment than Rea. But when comparing it to its historical volatility, Macquarie Group is 1.46 times less risky than Rea. It trades about 0.11 of its potential returns per unit of risk. Rea Group is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 18,102 in Rea Group on August 29, 2024 and sell it today you would earn a total of 7,001 from holding Rea Group or generate 38.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Macquarie Group vs. Rea Group
Performance |
| Timeline |
| Macquarie Group |
| Rea Group |
Macquarie and Rea Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Macquarie and Rea
The main advantage of trading using opposite Macquarie and Rea positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Macquarie position performs unexpectedly, Rea 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 Rea will offset losses from the drop in Rea's long position.| Macquarie vs. Charter Hall Retail | Macquarie vs. Centaurus Metals | Macquarie vs. Spirit Telecom | Macquarie vs. Perseus Mining |
| Rea vs. Regal Investment | Rea vs. Australian United Investment | Rea vs. EMvision Medical Devices | Rea vs. A1 Investments Resources |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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