Correlation Between Major Drilling and Dupont De

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

Diversification Opportunities for Major Drilling and Dupont De

0.52

Correlation Coefficient

Major Drilling  Dupont De

Very weak diversification

The 3 months correlation between Major and Dupont is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Major Drilling Group and Dupont De Nemours in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dupont De Nemours 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 Dupont De. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dupont De Nemours has no effect on the direction of Major Drilling i.e., Major Drilling and Dupont De go up and down completely randomly.

Pair Corralation between Major Drilling and Dupont De

Assuming the 90 days horizon Major Drilling Group is expected to under-perform the Dupont De. In addition to that, Major Drilling is 1.43 times more volatile than Dupont De Nemours. It trades about -0.01 of its total potential returns per unit of risk. Dupont De Nemours is currently generating about 0.04 per unit of volatility. If you would invest  6,214  in Dupont De Nemours on December 2, 2024 and sell it today you would earn a total of  1,580  from holding Dupont De Nemours or generate 25.43% return on investment over 90 days.

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

Major Drilling Group  vs.  Dupont De Nemours

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.

Dupont De Nemours

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Major Drilling and Dupont De

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

The idea behind Major Drilling Group and Dupont De Nemours 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.