Correlation Between Major Drilling and GREENLIGHT CAP

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

Diversification Opportunities for Major Drilling and GREENLIGHT CAP

0.38

Correlation Coefficient

Major Drilling  GREENLIGHT CAP

Weak diversification

The 3 months correlation between Major and GREENLIGHT is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Major Drilling Group and GREENLIGHT CAP RE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GREENLIGHT CAP RE 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 GREENLIGHT CAP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GREENLIGHT CAP RE has no effect on the direction of Major Drilling i.e., Major Drilling and GREENLIGHT CAP go up and down completely randomly.

Pair Corralation between Major Drilling and GREENLIGHT CAP

Assuming the 90 days horizon Major Drilling Group is expected to under-perform the GREENLIGHT CAP. In addition to that, Major Drilling is 1.58 times more volatile than GREENLIGHT CAP RE. It trades about -0.06 of its total potential returns per unit of risk. GREENLIGHT CAP RE is currently generating about -0.07 per unit of volatility. If you would invest  1,320  in GREENLIGHT CAP RE on December 21, 2024 and sell it today you would lose (90.00) from holding GREENLIGHT CAP RE or give up 6.82% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

Major Drilling Group  vs.  GREENLIGHT CAP RE

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 latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

GREENLIGHT CAP RE

Risk-Adjusted Performance

Very Weak

Over the last 90 days GREENLIGHT CAP RE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's essential indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Major Drilling and GREENLIGHT CAP

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

The idea behind Major Drilling Group and GREENLIGHT CAP RE 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..