Correlation Between Major Drilling and American Public

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

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

Diversification Opportunities for Major Drilling and American Public

0.18

Correlation Coefficient

Major Drilling  American Public

Average diversification

The 3 months correlation between Major and American is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Major Drilling Group and American Public Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Public Education and Major Drilling 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 Major Drilling Group are associated (or correlated) with American Public. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Public Education has no effect on the direction of Major Drilling i.e., Major Drilling and American Public go up and down completely randomly.

Pair Corralation between Major Drilling and American Public

Assuming the 90 days horizon Major Drilling Group is expected to generate 0.96 times more return on investment than American Public. However, Major Drilling Group is 1.04 times less risky than American Public. It trades about -0.01 of its potential returns per unit of risk. American Public Education is currently generating about -0.05 per unit of risk. If you would invest  555.00  in Major Drilling Group on December 4, 2024 and sell it today you would lose (5.00) from holding Major Drilling Group or give up 0.9% of portfolio value over 90 days.

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

Major Drilling Group  vs.  American Public Education

Major Drilling Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Major Drilling Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Major Drilling is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

American Public Education

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in American Public Education are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, American Public is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Major Drilling and American Public

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

The idea behind Major Drilling Group and American Public Education 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.