Correlation Between EP Financial and Macquarie Technology

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

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

Diversification Opportunities for EP Financial and Macquarie Technology

0.29

Correlation Coefficient

EP Financial  Macquarie Technology

Modest diversification

The 3 months correlation between EP1 and Macquarie is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding EP Financial Group and Macquarie Technology Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Macquarie Technology and EP Financial 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 EP Financial Group 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 EP Financial i.e., EP Financial and Macquarie Technology go up and down completely randomly.

Pair Corralation between EP Financial and Macquarie Technology

Assuming the 90 days trading horizon EP Financial is expected to generate 1.03 times less return on investment than Macquarie Technology. In addition to that, EP Financial is 1.46 times more volatile than Macquarie Technology Group. It trades about 0.04 of its total potential returns per unit of risk. Macquarie Technology Group is currently generating about 0.06 per unit of volatility. If you would invest  8,128  in Macquarie Technology Group on September 25, 2024 and sell it today you would earn a total of  411.00  from holding Macquarie Technology Group or generate 5.06% return on investment over 90 days.

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

EP Financial Group  vs.  Macquarie Technology Group

EP Financial Group

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in EP Financial Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, EP Financial is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Macquarie Technology

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Macquarie Technology Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Macquarie Technology 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 EP Financial and Macquarie Technology

The main advantage of trading using opposite EP Financial and Macquarie Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EP Financial 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 EP Financial Group 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.