Correlation Between Major Drilling and Sun Lif

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

Diversification Opportunities for Major Drilling and Sun Lif

-0.37

Correlation Coefficient

Major Drilling  Sun Lif

Very good diversification

The 3 months correlation between Major and Sun is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Major Drilling Group and Sun Lif Non in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sun Lif Non 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 Sun Lif. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sun Lif Non has no effect on the direction of Major Drilling i.e., Major Drilling and Sun Lif go up and down completely randomly.

Pair Corralation between Major Drilling and Sun Lif

Assuming the 90 days trading horizon Major Drilling Group is expected to under-perform the Sun Lif. In addition to that, Major Drilling is 1.03 times more volatile than Sun Lif Non. It trades about -0.43 of its total potential returns per unit of risk. Sun Lif Non is currently generating about 0.12 per unit of volatility. If you would invest  1,901  in Sun Lif Non on October 8, 2024 and sell it today you would earn a total of  39.00  from holding Sun Lif Non or generate 2.05% 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.  Sun Lif Non

Major Drilling Group

Risk-Adjusted Performance

1 of 100

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

Sun Lif Non

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sun Lif Non are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, Sun Lif is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Major Drilling and Sun Lif

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

The idea behind Major Drilling Group and Sun Lif Non 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.

Check out your portfolio center.

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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.