Correlation Between Major Drilling and Science Applications

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

Diversification Opportunities for Major Drilling and Science Applications

-0.23

Correlation Coefficient

Major Drilling  Science Applications

Very good diversification

The 3 months correlation between Major and Science is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Major Drilling Group and Science Applications Internati in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Science Applications 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 Science Applications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Science Applications has no effect on the direction of Major Drilling i.e., Major Drilling and Science Applications go up and down completely randomly.

Pair Corralation between Major Drilling and Science Applications

Assuming the 90 days horizon Major Drilling is expected to generate 2.06 times less return on investment than Science Applications. In addition to that, Major Drilling is 1.23 times more volatile than Science Applications International. It trades about 0.01 of its total potential returns per unit of risk. Science Applications International is currently generating about 0.02 per unit of volatility. If you would invest  9,998  in Science Applications International on September 30, 2024 and sell it today you would earn a total of  502.00  from holding Science Applications International or generate 5.02% return on investment over 90 days.

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

Major Drilling Group  vs.  Science Applications Internati

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 current stock price disturbance, may contribute to mid-run losses for the stockholders.

Science Applications

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Science Applications International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Major Drilling and Science Applications

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

The idea behind Major Drilling Group and Science Applications International 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.