Correlation Between Major Drilling and Arizona Gold

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

Diversification Opportunities for Major Drilling and Arizona Gold

0.4

Correlation Coefficient

Major Drilling  Arizona Gold

Very weak diversification

The 3 months correlation between Major and Arizona is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Major Drilling Group and Arizona Gold Silver in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arizona Gold Silver 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 Arizona Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arizona Gold Silver has no effect on the direction of Major Drilling i.e., Major Drilling and Arizona Gold go up and down completely randomly.

Pair Corralation between Major Drilling and Arizona Gold

Assuming the 90 days trading horizon Major Drilling Group is expected to under-perform the Arizona Gold. But the stock apears to be less risky and, when comparing its historical volatility, Major Drilling Group is 1.87 times less risky than Arizona Gold. The stock trades about -0.17 of its potential returns per unit of risk. The Arizona Gold Silver is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  43.00  in Arizona Gold Silver on September 23, 2024 and sell it today you would earn a total of  6.00  from holding Arizona Gold Silver or generate 13.95% return on investment over 90 days.

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

Major Drilling Group  vs.  Arizona Gold Silver

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 latest stock price disarray, may contribute to short-term losses for the investors.

Arizona Gold Silver

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Arizona Gold Silver are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Arizona Gold showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Major Drilling and Arizona Gold

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

The idea behind Major Drilling Group and Arizona Gold Silver 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.