Correlation Between Australian Unity and Macquarie

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

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

Diversification Opportunities for Australian Unity and Macquarie

-0.36

Correlation Coefficient

Australian Unity  Macquarie

Very good diversification

The 3 months correlation between Australian and Macquarie is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Australian Unity Office and Macquarie Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Macquarie Group and Australian Unity 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 Australian Unity Office are associated (or correlated) with Macquarie. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Macquarie Group has no effect on the direction of Australian Unity i.e., Australian Unity and Macquarie go up and down completely randomly.

Pair Corralation between Australian Unity and Macquarie

Assuming the 90 days trading horizon Australian Unity Office is expected to under-perform the Macquarie. But the stock apears to be less risky and, when comparing its historical volatility, Australian Unity Office is 1.17 times less risky than Macquarie. The stock trades about -0.13 of its potential returns per unit of risk. The Macquarie Group is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  22,457  in Macquarie Group on September 13, 2024 and sell it today you would earn a total of  54.00  from holding Macquarie Group or generate 0.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Australian Unity Office  vs.  Macquarie Group

Australian Unity Office

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Australian Unity Office has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Macquarie Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Macquarie Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Macquarie is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Australian Unity and Macquarie

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

The idea behind Australian Unity Office and Macquarie 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.