Correlation Between Macmahon Holdings and Azimut Exploration

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

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

Diversification Opportunities for Macmahon Holdings and Azimut Exploration

0.6

Correlation Coefficient

Macmahon Holdings  Azimut Exploration

Poor diversification

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

Pair Corralation between Macmahon Holdings and Azimut Exploration

Assuming the 90 days horizon Macmahon Holdings is expected to generate 1.23 times less return on investment than Azimut Exploration. But when comparing it to its historical volatility, Macmahon Holdings Limited is 1.68 times less risky than Azimut Exploration. It trades about 0.12 of its potential returns per unit of risk. Azimut Exploration is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  35.00  in Azimut Exploration on September 14, 2024 and sell it today you would earn a total of  10.00  from holding Azimut Exploration or generate 28.57% return on investment over 90 days.

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

Macmahon Holdings Limited  vs.  Azimut Exploration

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.

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.

Pair Trading with Macmahon Holdings and Azimut Exploration

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

The idea behind Macmahon Holdings Limited and Azimut Exploration 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.