Correlation Between Macquarie and National Australia

Can any of the company-specific risk be diversified away by investing in both Macquarie 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 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 Group and National Australia Bank, you can compare the effects of market volatilities on Macquarie 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 with a short position of National Australia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Macquarie and National Australia.

Diversification Opportunities for Macquarie and National Australia

0.3

Correlation Coefficient

Macquarie  National Australia

Weak diversification

The 3 months correlation between Macquarie and National is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Macquarie 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 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 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 i.e., Macquarie and National Australia go up and down completely randomly.

Pair Corralation between Macquarie and National Australia

Assuming the 90 days trading horizon Macquarie Group is expected to generate 1.61 times more return on investment than National Australia. However, Macquarie is 1.61 times more volatile than National Australia Bank. It trades about 0.01 of its potential returns per unit of risk. National Australia Bank is currently generating about 0.02 per unit of risk. If you would invest  22,457  in Macquarie Group on September 13, 2024 and sell it today you would earn a total of  100.00  from holding Macquarie Group or generate 0.45% 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.  National Australia Bank

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.

National Australia Bank

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in National Australia Bank are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, National Australia is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Macquarie and National Australia

The main advantage of trading using opposite Macquarie and National Australia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Macquarie 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 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.