Correlation Between Major Drilling and Champion Bear

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

Diversification Opportunities for Major Drilling and Champion Bear

-0.36

Correlation Coefficient

Major Drilling  Champion Bear

Very good diversification

The 3 months correlation between Major and Champion is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Major Drilling Group and Champion Bear Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Champion Bear Resources 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 Champion Bear. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Champion Bear Resources has no effect on the direction of Major Drilling i.e., Major Drilling and Champion Bear go up and down completely randomly.

Pair Corralation between Major Drilling and Champion Bear

Assuming the 90 days trading horizon Major Drilling Group is expected to generate 0.14 times more return on investment than Champion Bear. However, Major Drilling Group is 6.91 times less risky than Champion Bear. It trades about 0.03 of its potential returns per unit of risk. Champion Bear Resources is currently generating about -0.28 per unit of risk. If you would invest  860.00  in Major Drilling Group on September 18, 2024 and sell it today you would earn a total of  8.00  from holding Major Drilling Group or generate 0.93% return on investment over 90 days.

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

Major Drilling Group  vs.  Champion Bear Resources

Major Drilling Group

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Major Drilling Group are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating forward indicators, Major Drilling may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Champion Bear Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Champion Bear Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Major Drilling and Champion Bear

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

The idea behind Major Drilling Group and Champion Bear Resources 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.