Correlation Between Macquarie Group and Australian Agricultural
Can any of the company-specific risk be diversified away by investing in both Macquarie Group and Australian Agricultural 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 Group and Australian Agricultural into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Macquarie Group Ltd and Australian Agricultural, you can compare the effects of market volatilities on Macquarie Group and Australian Agricultural 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 Group with a short position of Australian Agricultural. Check out your portfolio center. Please also check ongoing floating volatility patterns of Macquarie Group and Australian Agricultural.
Diversification Opportunities for Macquarie Group and Australian Agricultural
-0.44 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Macquarie and Australian is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Macquarie Group Ltd and Australian Agricultural in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Australian Agricultural and Macquarie Group 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 Ltd are associated (or correlated) with Australian Agricultural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Australian Agricultural has no effect on the direction of Macquarie Group i.e., Macquarie Group and Australian Agricultural go up and down completely randomly.
Pair Corralation between Macquarie Group and Australian Agricultural
Assuming the 90 days trading horizon Macquarie Group Ltd is expected to generate 0.23 times more return on investment than Australian Agricultural. However, Macquarie Group Ltd is 4.4 times less risky than Australian Agricultural. It trades about 0.05 of its potential returns per unit of risk. Australian Agricultural is currently generating about -0.02 per unit of risk. If you would invest 9,359 in Macquarie Group Ltd on September 14, 2024 and sell it today you would earn a total of 1,041 from holding Macquarie Group Ltd or generate 11.12% 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 Ltd vs. Australian Agricultural
Performance |
| Timeline |
| Macquarie Group |
| Australian Agricultural |
Macquarie Group and Australian Agricultural Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Macquarie Group and Australian Agricultural
The main advantage of trading using opposite Macquarie Group and Australian Agricultural positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Macquarie Group position performs unexpectedly, Australian Agricultural 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 Australian Agricultural will offset losses from the drop in Australian Agricultural's long position.| Macquarie Group vs. Healthco Healthcare and | Macquarie Group vs. Auctus Alternative Investments | Macquarie Group vs. BKI Investment | Macquarie Group vs. Austco Healthcare |
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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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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