Correlation Between Aeris Environmental and Macquarie Technology

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

By analyzing existing cross correlation between Aeris Environmental and Macquarie Technology Group, you can compare the effects of market volatilities on Aeris Environmental and Macquarie Technology 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 Aeris Environmental with a short position of Macquarie Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aeris Environmental and Macquarie Technology.

Diversification Opportunities for Aeris Environmental and Macquarie Technology

0.33

Correlation Coefficient

Aeris Environmental  Macquarie Technology

Weak diversification

The 3 months correlation between Aeris and Macquarie is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Aeris Environmental and Macquarie Technology Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Macquarie Technology and Aeris Environmental 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 Aeris Environmental are associated (or correlated) with Macquarie Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Macquarie Technology has no effect on the direction of Aeris Environmental i.e., Aeris Environmental and Macquarie Technology go up and down completely randomly.

Pair Corralation between Aeris Environmental and Macquarie Technology

Assuming the 90 days trading horizon Aeris Environmental is expected to generate 2.86 times more return on investment than Macquarie Technology. However, Aeris Environmental is 2.86 times more volatile than Macquarie Technology Group. It trades about 0.1 of its potential returns per unit of risk. Macquarie Technology Group is currently generating about 0.09 per unit of risk. If you would invest  6.80  in Aeris Environmental on September 15, 2024 and sell it today you would earn a total of  1.70  from holding Aeris Environmental or generate 25.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Aeris Environmental  vs.  Macquarie Technology Group

Aeris Environmental

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aeris Environmental are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain forward indicators, Aeris Environmental unveiled solid returns over the last few months and may actually be approaching a breakup point.

Macquarie Technology

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Macquarie Technology Group are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Macquarie Technology may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Aeris Environmental and Macquarie Technology

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

The idea behind Aeris Environmental and Macquarie Technology Group 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.