Correlation Between Macquarie Technology and National Australia

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

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

Diversification Opportunities for Macquarie Technology and National Australia

0.67

Correlation Coefficient

Macquarie Technology  National Australia

Poor diversification

The 3 months correlation between Macquarie and National is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Macquarie Technology Group and National Australia Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Australia Bank and Macquarie Technology 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 Macquarie Technology Group are associated (or correlated) with National Australia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Australia Bank has no effect on the direction of Macquarie Technology i.e., Macquarie Technology and National Australia go up and down completely randomly.

Pair Corralation between Macquarie Technology and National Australia

Assuming the 90 days trading horizon Macquarie Technology Group is expected to generate 6.69 times more return on investment than National Australia. However, Macquarie Technology is 6.69 times more volatile than National Australia Bank. It trades about 0.06 of its potential returns per unit of risk. National Australia Bank is currently generating about 0.06 per unit of risk. If you would invest  5,601  in Macquarie Technology Group on September 1, 2024 and sell it today you would earn a total of  3,196  from holding Macquarie Technology Group or generate 57.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

Macquarie Technology Group  vs.  National Australia Bank

Macquarie Technology

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Macquarie Technology Group are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Macquarie Technology may actually be approaching a critical reversion point that can send shares even higher in December 2024.

National Australia Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days National Australia Bank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, National Australia is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Macquarie Technology and National Australia

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

The idea behind Macquarie Technology Group and National Australia Bank 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.

Check out your portfolio center.

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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.