Correlation Between Major Drilling and SYSTEMAIR

Can any of the company-specific risk be diversified away by investing in both Major Drilling and SYSTEMAIR 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 SYSTEMAIR 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 SYSTEMAIR AB, you can compare the effects of market volatilities on Major Drilling and SYSTEMAIR 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 SYSTEMAIR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Major Drilling and SYSTEMAIR.

Diversification Opportunities for Major Drilling and SYSTEMAIR

0.37

Correlation Coefficient

Major Drilling  SYSTEMAIR

Weak diversification

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

Pair Corralation between Major Drilling and SYSTEMAIR

Assuming the 90 days horizon Major Drilling Group is expected to under-perform the SYSTEMAIR. But the stock apears to be less risky and, when comparing its historical volatility, Major Drilling Group is 1.36 times less risky than SYSTEMAIR. The stock trades about -0.02 of its potential returns per unit of risk. The SYSTEMAIR AB is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  426.00  in SYSTEMAIR AB on October 11, 2024 and sell it today you would earn a total of  346.00  from holding SYSTEMAIR AB or generate 81.22% return on investment over 90 days.

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

Major Drilling Group  vs.  SYSTEMAIR AB

Major Drilling Group

Risk-Adjusted Performance

1 of 100

Weak

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

SYSTEMAIR AB

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SYSTEMAIR AB are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, SYSTEMAIR may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Major Drilling and SYSTEMAIR

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

The idea behind Major Drilling Group and SYSTEMAIR AB 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.