Correlation Between Major Drilling and SCANSOURCE (SC3SG)

Can any of the company-specific risk be diversified away by investing in both Major Drilling and SCANSOURCE (SC3SG) 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 SCANSOURCE (SC3SG) 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 SCANSOURCE, you can compare the effects of market volatilities on Major Drilling and SCANSOURCE (SC3SG) 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 SCANSOURCE (SC3SG). Check out your portfolio center. Please also check ongoing floating volatility patterns of Major Drilling and SCANSOURCE (SC3SG).

Diversification Opportunities for Major Drilling and SCANSOURCE (SC3SG)

0.32

Correlation Coefficient

Major Drilling  SCANSOURCE (SC3SG)

Weak diversification

The 3 months correlation between Major and SCANSOURCE is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Major Drilling Group and SCANSOURCE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SCANSOURCE (SC3SG) 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 SCANSOURCE (SC3SG). Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SCANSOURCE (SC3SG) has no effect on the direction of Major Drilling i.e., Major Drilling and SCANSOURCE (SC3SG) go up and down completely randomly.

Pair Corralation between Major Drilling and SCANSOURCE (SC3SG)

Assuming the 90 days horizon Major Drilling Group is expected to generate 1.05 times more return on investment than SCANSOURCE (SC3SG). However, Major Drilling is 1.05 times more volatile than SCANSOURCE. It trades about -0.06 of its potential returns per unit of risk. SCANSOURCE is currently generating about -0.22 per unit of risk. If you would invest  555.00  in Major Drilling Group on December 24, 2024 and sell it today you would lose (57.00) from holding Major Drilling Group or give up 10.27% of portfolio value over 90 days.

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

Major Drilling Group  vs.  SCANSOURCE

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 uncertain 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.

SCANSOURCE (SC3SG)

Risk-Adjusted Performance

Very Weak

Over the last 90 days SCANSOURCE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 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 SCANSOURCE (SC3SG)

The main advantage of trading using opposite Major Drilling and SCANSOURCE (SC3SG) positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Major Drilling position performs unexpectedly, SCANSOURCE (SC3SG) 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 SCANSOURCE (SC3SG) will offset losses from the drop in SCANSOURCE (SC3SG)'s long position.

The idea behind Major Drilling Group and SCANSOURCE 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.