Correlation Between Macquarie Group and Charles Schwab

Can any of the company-specific risk be diversified away by investing in both Macquarie Group and Charles Schwab 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 Charles Schwab into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Macquarie Group Limited and The Charles Schwab, you can compare the effects of market volatilities on Macquarie Group and Charles Schwab 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 Charles Schwab. Check out your portfolio center. Please also check ongoing floating volatility patterns of Macquarie Group and Charles Schwab.

Diversification Opportunities for Macquarie Group and Charles Schwab

0.25

Correlation Coefficient

Macquarie Group  Charles Schwab

Modest diversification

The 3 months correlation between Macquarie and Charles is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Macquarie Group Limited and The Charles Schwab in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Charles Schwab 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 Limited are associated (or correlated) with Charles Schwab. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Charles Schwab has no effect on the direction of Macquarie Group i.e., Macquarie Group and Charles Schwab go up and down completely randomly.

Pair Corralation between Macquarie Group and Charles Schwab

Assuming the 90 days horizon Macquarie Group Limited is expected to under-perform the Charles Schwab. But the stock apears to be less risky and, when comparing its historical volatility, Macquarie Group Limited is 1.76 times less risky than Charles Schwab. The stock trades about -0.05 of its potential returns per unit of risk. The The Charles Schwab is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  5,814  in The Charles Schwab on September 23, 2024 and sell it today you would earn a total of  1,253  from holding The Charles Schwab or generate 21.55% 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 Limited  vs.  The Charles Schwab

Macquarie Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Macquarie Group Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Macquarie Group is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Charles Schwab

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Charles Schwab are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Charles Schwab reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Macquarie Group and Charles Schwab

The main advantage of trading using opposite Macquarie Group and Charles Schwab positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Macquarie Group position performs unexpectedly, Charles Schwab 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 Charles Schwab will offset losses from the drop in Charles Schwab's long position.

The idea behind Macquarie Group Limited and The Charles Schwab pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Global Correlations module to find global opportunities by holding instruments from different markets.