Correlation Between Major Drilling and Ramaco Resources

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

Diversification Opportunities for Major Drilling and Ramaco Resources

0.16

Correlation Coefficient

Major Drilling  Ramaco Resources

Average diversification

The 3 months correlation between Major and Ramaco is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Major Drilling Group and Ramaco Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ramaco Resources 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 Ramaco Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ramaco Resources has no effect on the direction of Major Drilling i.e., Major Drilling and Ramaco Resources go up and down completely randomly.

Pair Corralation between Major Drilling and Ramaco Resources

Assuming the 90 days horizon Major Drilling Group is expected to generate 0.92 times more return on investment than Ramaco Resources. However, Major Drilling Group is 1.08 times less risky than Ramaco Resources. It trades about -0.03 of its potential returns per unit of risk. Ramaco Resources is currently generating about -0.08 per unit of risk. If you would invest  572.00  in Major Drilling Group on December 21, 2024 and sell it today you would lose (39.00) from holding Major Drilling Group or give up 6.82% of portfolio value over 90 days.

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

Major Drilling Group  vs.  Ramaco Resources

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.

Ramaco Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ramaco Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's fundamental indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Major Drilling and Ramaco Resources

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

The idea behind Major Drilling Group and Ramaco Resources 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.