Correlation Between Major Drilling and Ricoh Company

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

Diversification Opportunities for Major Drilling and Ricoh Company

0.66

Correlation Coefficient

Major Drilling  Ricoh Company

Poor diversification

The 3 months correlation between Major and Ricoh is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Major Drilling Group and Ricoh Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ricoh Company 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 Ricoh Company. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ricoh Company has no effect on the direction of Major Drilling i.e., Major Drilling and Ricoh Company go up and down completely randomly.

Pair Corralation between Major Drilling and Ricoh Company

Assuming the 90 days horizon Major Drilling is expected to generate 1.07 times less return on investment than Ricoh Company. In addition to that, Major Drilling is 1.29 times more volatile than Ricoh Company. It trades about 0.1 of its total potential returns per unit of risk. Ricoh Company is currently generating about 0.14 per unit of volatility. If you would invest  950.00  in Ricoh Company on September 18, 2024 and sell it today you would earn a total of  150.00  from holding Ricoh Company or generate 15.79% return on investment over 90 days.

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

Major Drilling Group  vs.  Ricoh Company

Major Drilling Group

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Major Drilling Group are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Major Drilling reported solid returns over the last few months and may actually be approaching a breakup point.

Ricoh Company

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ricoh Company are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, Ricoh Company reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Major Drilling and Ricoh Company

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

The idea behind Major Drilling Group and Ricoh Company 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..