Correlation Between Macquarie Bank and Judo Capital

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

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

Diversification Opportunities for Macquarie Bank and Judo Capital

0.55

Correlation Coefficient

Macquarie Bank  Judo Capital

Very weak diversification

The 3 months correlation between Macquarie and Judo is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Macquarie Bank Ltd and Judo Capital Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Judo Capital Holdings and Macquarie Bank 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 Bank Ltd are associated (or correlated) with Judo Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Judo Capital Holdings has no effect on the direction of Macquarie Bank i.e., Macquarie Bank and Judo Capital go up and down completely randomly.

Pair Corralation between Macquarie Bank and Judo Capital

Assuming the 90 days trading horizon Macquarie Bank is expected to generate 2.02 times less return on investment than Judo Capital. But when comparing it to its historical volatility, Macquarie Bank Ltd is 5.58 times less risky than Judo Capital. It trades about 0.07 of its potential returns per unit of risk. Judo Capital Holdings is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  176.00  in Judo Capital Holdings on September 21, 2024 and sell it today you would earn a total of  3.00  from holding Judo Capital Holdings or generate 1.7% return on investment over 90 days.

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

Macquarie Bank Ltd  vs.  Judo Capital Holdings

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.

Judo Capital Holdings

Risk-Adjusted Performance

1 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Judo Capital Holdings are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Judo Capital 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 Macquarie Bank and Judo Capital

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

The idea behind Macquarie Bank Ltd and Judo Capital Holdings 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.