Correlation Between Macquarie Group and Vulcan Steel

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

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

Diversification Opportunities for Macquarie Group and Vulcan Steel

-0.37

Correlation Coefficient

Macquarie Group  Vulcan Steel

Very good diversification

The 3 months correlation between Macquarie and Vulcan is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Macquarie Group Ltd and Vulcan Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vulcan Steel and Macquarie Group 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 Ltd are associated (or correlated) with Vulcan Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vulcan Steel has no effect on the direction of Macquarie Group i.e., Macquarie Group and Vulcan Steel go up and down completely randomly.

Pair Corralation between Macquarie Group and Vulcan Steel

Assuming the 90 days trading horizon Macquarie Group Ltd is expected to under-perform the Vulcan Steel. But the preferred stock apears to be less risky and, when comparing its historical volatility, Macquarie Group Ltd is 7.18 times less risky than Vulcan Steel. The preferred stock trades about -0.03 of its potential returns per unit of risk. The Vulcan Steel is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  724.00  in Vulcan Steel on September 19, 2024 and sell it today you would lose (22.00) from holding Vulcan Steel or give up 3.04% of portfolio value over 90 days.

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

Macquarie Group Ltd  vs.  Vulcan Steel

Macquarie Group

Risk-Adjusted Performance

0 of 100

Insignificant

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

Vulcan Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vulcan Steel has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable essential indicators, Vulcan Steel 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 Group and Vulcan Steel

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

The idea behind Macquarie Group Ltd and Vulcan Steel 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.