Correlation Between Major Drilling and Lendlease

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

Diversification Opportunities for Major Drilling and Lendlease

-0.03

Correlation Coefficient

Major Drilling  Lendlease

Good diversification

The 3 months correlation between Major and Lendlease is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Major Drilling Group and Lendlease Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lendlease Group 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 Lendlease. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lendlease Group has no effect on the direction of Major Drilling i.e., Major Drilling and Lendlease go up and down completely randomly.

Pair Corralation between Major Drilling and Lendlease

Assuming the 90 days horizon Major Drilling Group is expected to under-perform the Lendlease. In addition to that, Major Drilling is 1.1 times more volatile than Lendlease Group. It trades about -0.02 of its total potential returns per unit of risk. Lendlease Group is currently generating about -0.02 per unit of volatility. If you would invest  489.00  in Lendlease Group on October 4, 2024 and sell it today you would lose (118.00) from holding Lendlease Group or give up 24.13% of portfolio value over 90 days.

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

Major Drilling Group  vs.  Lendlease Group

Major Drilling Group

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Major Drilling Group are ranked lower than 2 (%) 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.

Lendlease Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lendlease Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile 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 Lendlease

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

The idea behind Major Drilling Group and Lendlease Group 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.