Correlation Between Major Drilling and Orex Minerals

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

Diversification Opportunities for Major Drilling and Orex Minerals

-0.48

Correlation Coefficient

Major Drilling  Orex Minerals

Very good diversification

The 3 months correlation between Major and Orex is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Major Drilling Group and Orex Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orex Minerals 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 Orex Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orex Minerals has no effect on the direction of Major Drilling i.e., Major Drilling and Orex Minerals go up and down completely randomly.

Pair Corralation between Major Drilling and Orex Minerals

Assuming the 90 days trading horizon Major Drilling Group is expected to generate 0.33 times more return on investment than Orex Minerals. However, Major Drilling Group is 3.04 times less risky than Orex Minerals. It trades about 0.1 of its potential returns per unit of risk. Orex Minerals is currently generating about -0.12 per unit of risk. If you would invest  784.00  in Major Drilling Group on September 14, 2024 and sell it today you would earn a total of  92.00  from holding Major Drilling Group or generate 11.73% return on investment over 90 days.

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

Major Drilling Group  vs.  Orex Minerals

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.

Orex Minerals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Orex Minerals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Major Drilling and Orex Minerals

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

The idea behind Major Drilling Group and Orex Minerals 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.