Correlation Between Major Drilling and Micron Technology

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

Diversification Opportunities for Major Drilling and Micron Technology

0.55

Correlation Coefficient

Major Drilling  Micron Technology

Very weak diversification

The 3 months correlation between Major and Micron is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Major Drilling Group and Micron Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Micron Technology 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 Micron Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Micron Technology has no effect on the direction of Major Drilling i.e., Major Drilling and Micron Technology go up and down completely randomly.

Pair Corralation between Major Drilling and Micron Technology

Assuming the 90 days horizon Major Drilling Group is expected to generate 0.66 times more return on investment than Micron Technology. However, Major Drilling Group is 1.52 times less risky than Micron Technology. It trades about -0.02 of its potential returns per unit of risk. Micron Technology is currently generating about -0.06 per unit of risk. If you would invest  565.00  in Major Drilling Group on September 23, 2024 and sell it today you would lose (20.00) from holding Major Drilling Group or give up 3.54% of portfolio value over 90 days.

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

Major Drilling Group  vs.  Micron Technology

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

Micron Technology

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Micron Technology are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Micron Technology is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Major Drilling and Micron Technology

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

The idea behind Major Drilling Group and Micron Technology 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.