Correlation Between Major Drilling and Nubian Resources

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

Diversification Opportunities for Major Drilling and Nubian Resources

0.19

Correlation Coefficient

Major Drilling  Nubian Resources

Average diversification

The 3 months correlation between Major and Nubian is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Major Drilling Group and Nubian Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nubian 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 Nubian Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nubian Resources has no effect on the direction of Major Drilling i.e., Major Drilling and Nubian Resources go up and down completely randomly.

Pair Corralation between Major Drilling and Nubian Resources

Assuming the 90 days trading horizon Major Drilling Group is expected to under-perform the Nubian Resources. But the stock apears to be less risky and, when comparing its historical volatility, Major Drilling Group is 9.45 times less risky than Nubian Resources. The stock trades about 0.0 of its potential returns per unit of risk. The Nubian Resources is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  6.50  in Nubian Resources on December 28, 2024 and sell it today you would earn a total of  1.50  from holding Nubian Resources or generate 23.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	77.78%
Values	Daily Returns

Major Drilling Group  vs.  Nubian Resources

Major Drilling Group

Risk-Adjusted Performance

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 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.

Nubian Resources

Risk-Adjusted Performance

OK

Over the last 90 days Nubian Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly weak basic indicators, Nubian Resources showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Major Drilling and Nubian Resources

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

The idea behind Major Drilling Group and Nubian 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.