Correlation Between Macquarie and Magellan Financial

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

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

Diversification Opportunities for Macquarie and Magellan Financial

0.34

Correlation Coefficient

Macquarie  Magellan Financial

Weak diversification

The 3 months correlation between Macquarie and Magellan is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Macquarie Group and Magellan Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magellan Financial and Macquarie 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 Group are associated (or correlated) with Magellan Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Magellan Financial has no effect on the direction of Macquarie i.e., Macquarie and Magellan Financial go up and down completely randomly.

Pair Corralation between Macquarie and Magellan Financial

Assuming the 90 days trading horizon Macquarie Group is expected to under-perform the Magellan Financial. But the stock apears to be less risky and, when comparing its historical volatility, Macquarie Group is 2.08 times less risky than Magellan Financial. The stock trades about -0.03 of its potential returns per unit of risk. The Magellan Financial Group is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,002  in Magellan Financial Group on September 26, 2024 and sell it today you would earn a total of  112.00  from holding Magellan Financial Group or generate 11.18% return on investment over 90 days.

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

Macquarie Group  vs.  Magellan Financial Group

Macquarie Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Macquarie Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Macquarie is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Magellan Financial

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Magellan Financial Group are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Magellan Financial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Macquarie and Magellan Financial

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

The idea behind Macquarie Group and Magellan Financial 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.