Correlation Between Major Drilling and PRECISION DRILLING

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

Diversification Opportunities for Major Drilling and PRECISION DRILLING

0.49

Correlation Coefficient

Major Drilling  PRECISION DRILLING

Very weak diversification

The 3 months correlation between Major and PRECISION is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Major Drilling Group and PRECISION DRILLING P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PRECISION DRILLING 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 PRECISION DRILLING. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PRECISION DRILLING has no effect on the direction of Major Drilling i.e., Major Drilling and PRECISION DRILLING go up and down completely randomly.

Pair Corralation between Major Drilling and PRECISION DRILLING

Assuming the 90 days horizon Major Drilling is expected to generate 3.62 times less return on investment than PRECISION DRILLING. But when comparing it to its historical volatility, Major Drilling Group is 1.01 times less risky than PRECISION DRILLING. It trades about 0.04 of its potential returns per unit of risk. PRECISION DRILLING P is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  5,300  in PRECISION DRILLING P on October 25, 2024 and sell it today you would earn a total of  1,150  from holding PRECISION DRILLING P or generate 21.7% return on investment over 90 days.

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

Major Drilling Group  vs.  PRECISION DRILLING P

Major Drilling Group

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Major Drilling Group are ranked lower than 3 (%) 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.

PRECISION DRILLING

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in PRECISION DRILLING P are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, PRECISION DRILLING reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Major Drilling and PRECISION DRILLING

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

The idea behind Major Drilling Group and PRECISION DRILLING P 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.