Correlation Between Azimut Exploration and Macmahon Holdings

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

By analyzing existing cross correlation between Azimut Exploration and Macmahon Holdings Limited, you can compare the effects of market volatilities on Azimut Exploration and Macmahon Holdings 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 Azimut Exploration with a short position of Macmahon Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Azimut Exploration and Macmahon Holdings.

Diversification Opportunities for Azimut Exploration and Macmahon Holdings

0.6

Correlation Coefficient

Azimut Exploration  Macmahon Holdings

Poor diversification

The 3 months correlation between Azimut and Macmahon is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Azimut Exploration and Macmahon Holdings Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Macmahon Holdings and Azimut Exploration 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 Azimut Exploration are associated (or correlated) with Macmahon Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Macmahon Holdings has no effect on the direction of Azimut Exploration i.e., Azimut Exploration and Macmahon Holdings go up and down completely randomly.

Pair Corralation between Azimut Exploration and Macmahon Holdings

Assuming the 90 days horizon Azimut Exploration is expected to generate 1.66 times more return on investment than Macmahon Holdings. However, Azimut Exploration is 1.66 times more volatile than Macmahon Holdings Limited. It trades about 0.1 of its potential returns per unit of risk. Macmahon Holdings Limited is currently generating about 0.12 per unit of risk. If you would invest  35.00  in Azimut Exploration on September 14, 2024 and sell it today you would earn a total of  12.00  from holding Azimut Exploration or generate 34.29% return on investment over 90 days.

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

Azimut Exploration  vs.  Macmahon Holdings Limited

Azimut Exploration

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Azimut Exploration are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Azimut Exploration reported solid returns over the last few months and may actually be approaching a breakup point.

Macmahon Holdings

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Macmahon Holdings Limited are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal technical indicators, Macmahon Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Azimut Exploration and Macmahon Holdings

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

The idea behind Azimut Exploration and Macmahon Holdings Limited 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.