Correlation Between Major Drilling and Nexus Gold

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

Diversification Opportunities for Major Drilling and Nexus Gold

0.01

Correlation Coefficient

Major Drilling  Nexus Gold

Significant diversification

The 3 months correlation between Major and Nexus is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Major Drilling Group and Nexus Gold Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nexus Gold Corp 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 Nexus Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nexus Gold Corp has no effect on the direction of Major Drilling i.e., Major Drilling and Nexus Gold go up and down completely randomly.

Pair Corralation between Major Drilling and Nexus Gold

Assuming the 90 days trading horizon Major Drilling is expected to generate 38.93 times less return on investment than Nexus Gold. But when comparing it to its historical volatility, Major Drilling Group is 16.04 times less risky than Nexus Gold. It trades about 0.04 of its potential returns per unit of risk. Nexus Gold Corp is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1.00  in Nexus Gold Corp on October 26, 2024 and sell it today you would earn a total of  0.00  from holding Nexus Gold Corp or generate 0.0% return on investment over 90 days.

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

Major Drilling Group  vs.  Nexus Gold Corp

Major Drilling Group

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Major Drilling Group are ranked lower than 3 (%) 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 recent stock price disarray, may contribute to short-term losses for the investors.

Nexus Gold Corp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nexus Gold Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Nexus Gold showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Major Drilling and Nexus Gold

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

The idea behind Major Drilling Group and Nexus Gold Corp 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.