Correlation Between Major Drilling and Heineken

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

Diversification Opportunities for Major Drilling and Heineken

-0.27

Correlation Coefficient

Major Drilling  Heineken

Very good diversification

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

Pair Corralation between Major Drilling and Heineken

Assuming the 90 days horizon Major Drilling Group is expected to under-perform the Heineken. In addition to that, Major Drilling is 1.11 times more volatile than Heineken NV. It trades about -0.06 of its total potential returns per unit of risk. Heineken NV is currently generating about 0.12 per unit of volatility. If you would invest  6,820  in Heineken NV on December 21, 2024 and sell it today you would earn a total of  1,024  from holding Heineken NV or generate 15.01% 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.  Heineken NV

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.

Heineken NV

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Heineken NV are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward-looking signals, Heineken reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Major Drilling and Heineken

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

The idea behind Major Drilling Group and Heineken NV 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.