Correlation Between Macquarie and Xero
Can any of the company-specific risk be diversified away by investing in both Macquarie and Xero 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 Xero into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Macquarie Group and Xero, you can compare the effects of market volatilities on Macquarie and Xero 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 Xero. Check out your portfolio center. Please also check ongoing floating volatility patterns of Macquarie and Xero.
Diversification Opportunities for Macquarie and Xero
Very weak diversification
The 3 months correlation between Macquarie and Xero is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Macquarie Group and Xero in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xero 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 Xero. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xero has no effect on the direction of Macquarie i.e., Macquarie and Xero go up and down completely randomly.
Pair Corralation between Macquarie and Xero
Assuming the 90 days trading horizon Macquarie is expected to generate 2.12 times less return on investment than Xero. But when comparing it to its historical volatility, Macquarie Group is 1.24 times less risky than Xero. It trades about 0.13 of its potential returns per unit of risk. Xero is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 14,319 in Xero on August 29, 2024 and sell it today you would earn a total of 3,095 from holding Xero or generate 21.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Macquarie Group vs. Xero
Performance |
| Timeline |
| Macquarie Group |
| Xero |
Macquarie and Xero Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Macquarie and Xero
The main advantage of trading using opposite Macquarie and Xero positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Macquarie position performs unexpectedly, Xero 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 Xero will offset losses from the drop in Xero's long position.| Macquarie vs. Charter Hall Retail | Macquarie vs. Centaurus Metals | Macquarie vs. Spirit Telecom | Macquarie vs. Perseus Mining |
| Xero vs. Mirrabooka Investments | Xero vs. MFF Capital Investments | Xero vs. Clime Investment Management | Xero vs. Platinum Asia Investments |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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