Correlation Between KDA and Major Drilling

Can any of the company-specific risk be diversified away by investing in both KDA and Major 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 KDA and Major Drilling into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between KDA Group and Major Drilling Group, you can compare the effects of market volatilities on KDA and Major 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 KDA with a short position of Major Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of KDA and Major Drilling.

Diversification Opportunities for KDA and Major Drilling

-0.39

Correlation Coefficient

KDA  Major Drilling

Very good diversification

The 3 months correlation between KDA and Major is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding KDA Group and Major Drilling Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Major Drilling Group and KDA 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 KDA Group are associated (or correlated) with Major Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Major Drilling Group has no effect on the direction of KDA i.e., KDA and Major Drilling go up and down completely randomly.

Pair Corralation between KDA and Major Drilling

Assuming the 90 days horizon KDA Group is expected to generate 1.76 times more return on investment than Major Drilling. However, KDA is 1.76 times more volatile than Major Drilling Group. It trades about 0.3 of its potential returns per unit of risk. Major Drilling Group is currently generating about -0.12 per unit of risk. If you would invest  25.00  in KDA Group on September 22, 2024 and sell it today you would earn a total of  5.00  from holding KDA Group or generate 20.0% return on investment over 90 days.

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

KDA Group  vs.  Major Drilling Group

KDA Group

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in KDA Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, KDA may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Major Drilling Group

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Major Drilling Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy forward indicators, Major Drilling is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with KDA and Major Drilling

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

The idea behind KDA Group and Major Drilling 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.

Check out your portfolio center.

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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.