Correlation Between Major Drilling and Imax Corp

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

Diversification Opportunities for Major Drilling and Imax Corp

0.4

Correlation Coefficient

Major Drilling  Imax Corp

Very weak diversification

The 3 months correlation between Major and Imax is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Major Drilling Group and Imax Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Imax 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 Imax Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Imax Corp has no effect on the direction of Major Drilling i.e., Major Drilling and Imax Corp go up and down completely randomly.

Pair Corralation between Major Drilling and Imax Corp

Assuming the 90 days horizon Major Drilling Group is expected to under-perform the Imax Corp. In addition to that, Major Drilling is 1.61 times more volatile than Imax Corp. It trades about -0.02 of its total potential returns per unit of risk. Imax Corp is currently generating about -0.01 per unit of volatility. If you would invest  2,485  in Imax Corp on December 19, 2024 and sell it today you would lose (51.00) from holding Imax Corp or give up 2.05% of portfolio value over 90 days.

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

Major Drilling Group  vs.  Imax Corp

Major Drilling Group

Risk-Adjusted Performance

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.

Imax Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Imax Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Imax Corp is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Major Drilling and Imax Corp

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

The idea behind Major Drilling Group and Imax 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.