Correlation Between Major Drilling and DATANG INTL

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

Diversification Opportunities for Major Drilling and DATANG INTL

-0.27

Correlation Coefficient

Major Drilling  DATANG INTL

Very good diversification

The 3 months correlation between Major and DATANG is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Major Drilling Group and DATANG INTL POW in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DATANG INTL POW 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 DATANG INTL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DATANG INTL POW has no effect on the direction of Major Drilling i.e., Major Drilling and DATANG INTL go up and down completely randomly.

Pair Corralation between Major Drilling and DATANG INTL

Assuming the 90 days horizon Major Drilling Group is expected to under-perform the DATANG INTL. But the stock apears to be less risky and, when comparing its historical volatility, Major Drilling Group is 1.78 times less risky than DATANG INTL. The stock trades about -0.02 of its potential returns per unit of risk. The DATANG INTL POW is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  12.00  in DATANG INTL POW on October 5, 2024 and sell it today you would earn a total of  4.00  from holding DATANG INTL POW or generate 33.33% 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.  DATANG INTL POW

Major Drilling Group

Risk-Adjusted Performance

0 of 100

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.

DATANG INTL POW

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DATANG INTL POW 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 February 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 DATANG INTL

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

The idea behind Major Drilling Group and DATANG INTL POW 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.