Correlation Between Major Drilling and Allient

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

Diversification Opportunities for Major Drilling and Allient

-0.19

Correlation Coefficient

Major Drilling  Allient

Good diversification

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

Pair Corralation between Major Drilling and Allient

Assuming the 90 days horizon Major Drilling is expected to generate 1.5 times less return on investment than Allient. But when comparing it to its historical volatility, Major Drilling Group is 2.52 times less risky than Allient. It trades about 0.33 of its potential returns per unit of risk. Allient is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  2,361  in Allient on October 23, 2024 and sell it today you would earn a total of  219.00  from holding Allient or generate 9.28% 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.  Allient

Major Drilling Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Major Drilling Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable essential indicators, Major Drilling is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Allient

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Allient are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Allient unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Major Drilling and Allient

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

The idea behind Major Drilling Group and Allient 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.