Correlation Between Macmahon Holdings and Geodrill

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

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

Diversification Opportunities for Macmahon Holdings and Geodrill

0.32

Correlation Coefficient

Macmahon Holdings  Geodrill

Weak diversification

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

Pair Corralation between Macmahon Holdings and Geodrill

Assuming the 90 days horizon Macmahon Holdings Limited is expected to generate 2.83 times more return on investment than Geodrill. However, Macmahon Holdings is 2.83 times more volatile than Geodrill Limited. It trades about 0.05 of its potential returns per unit of risk. Geodrill Limited is currently generating about 0.03 per unit of risk. If you would invest  23.00  in Macmahon Holdings Limited on September 3, 2024 and sell it today you would earn a total of  2.00  from holding Macmahon Holdings Limited or generate 8.7% return on investment over 90 days.

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

Macmahon Holdings Limited  vs.  Geodrill Limited

Macmahon Holdings

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Macmahon Holdings Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal technical indicators, Macmahon Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

Geodrill Limited

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Geodrill Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental indicators, Geodrill is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Macmahon Holdings and Geodrill

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

The idea behind Macmahon Holdings Limited and Geodrill Limited 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.