Correlation Between K2 Asset and Macquarie Bank

Can any of the company-specific risk be diversified away by investing in both K2 Asset and Macquarie Bank 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 K2 Asset and Macquarie Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between K2 Asset Management and Macquarie Bank Ltd, you can compare the effects of market volatilities on K2 Asset and Macquarie Bank 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 K2 Asset with a short position of Macquarie Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of K2 Asset and Macquarie Bank.

Diversification Opportunities for K2 Asset and Macquarie Bank

0.59

Correlation Coefficient

K2 Asset  Macquarie Bank

Very weak diversification

The 3 months correlation between KAM and Macquarie is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding K2 Asset Management and Macquarie Bank Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Macquarie Bank and K2 Asset 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 K2 Asset Management are associated (or correlated) with Macquarie Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Macquarie Bank has no effect on the direction of K2 Asset i.e., K2 Asset and Macquarie Bank go up and down completely randomly.

Pair Corralation between K2 Asset and Macquarie Bank

Assuming the 90 days trading horizon K2 Asset Management is expected to generate 10.56 times more return on investment than Macquarie Bank. However, K2 Asset is 10.56 times more volatile than Macquarie Bank Ltd. It trades about 0.21 of its potential returns per unit of risk. Macquarie Bank Ltd is currently generating about 0.07 per unit of risk. If you would invest  5.00  in K2 Asset Management on September 23, 2024 and sell it today you would earn a total of  2.50  from holding K2 Asset Management or generate 50.0% return on investment over 90 days.

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

K2 Asset Management  vs.  Macquarie Bank Ltd

K2 Asset Management

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in K2 Asset Management are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain primary indicators, K2 Asset unveiled solid returns over the last few months and may actually be approaching a breakup point.

Macquarie Bank

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Macquarie Bank Ltd are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Macquarie Bank is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with K2 Asset and Macquarie Bank

The main advantage of trading using opposite K2 Asset and Macquarie Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if K2 Asset position performs unexpectedly, Macquarie Bank 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 Bank will offset losses from the drop in Macquarie Bank's long position.

The idea behind K2 Asset Management and Macquarie Bank Ltd 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.