Correlation Between Major Drilling and Asiabasemetals

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

Diversification Opportunities for Major Drilling and Asiabasemetals

0.0

Correlation Coefficient

Major Drilling  Asiabasemetals

Pay attention - limited upside

The 3 months correlation between Major and Asiabasemetals is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Major Drilling Group and Asiabasemetals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asiabasemetals 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 Asiabasemetals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asiabasemetals has no effect on the direction of Major Drilling i.e., Major Drilling and Asiabasemetals go up and down completely randomly.

Pair Corralation between Major Drilling and Asiabasemetals

Assuming the 90 days trading horizon Major Drilling Group is expected to under-perform the Asiabasemetals. But the stock apears to be less risky and, when comparing its historical volatility, Major Drilling Group is 5.2 times less risky than Asiabasemetals. The stock trades about -0.07 of its potential returns per unit of risk. The Asiabasemetals is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  8.50  in Asiabasemetals on December 4, 2024 and sell it today you would lose (0.50) from holding Asiabasemetals or give up 5.88% of portfolio value over 90 days.

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

Major Drilling Group  vs.  Asiabasemetals

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. In spite of latest unfluctuating performance, the Stock's forward indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Asiabasemetals

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Asiabasemetals are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Asiabasemetals showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Major Drilling and Asiabasemetals

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

The idea behind Major Drilling Group and Asiabasemetals 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.