Correlation Between Major Drilling and Nascent Wine

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

Diversification Opportunities for Major Drilling and Nascent Wine

0.0

Correlation Coefficient

Major Drilling  Nascent Wine

Pay attention - limited upside

The 3 months correlation between Major and Nascent is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Major Drilling Group and Nascent Wine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nascent Wine 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 Nascent Wine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nascent Wine has no effect on the direction of Major Drilling i.e., Major Drilling and Nascent Wine go up and down completely randomly.

Pair Corralation between Major Drilling and Nascent Wine

If you would invest  0.01  in Nascent Wine on December 20, 2024 and sell it today you would lose  0.00  from holding Nascent Wine or give up 0.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Major Drilling Group  vs.  Nascent Wine

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 latest fragile performance, the Stock's essential indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Nascent Wine

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nascent Wine has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Nascent Wine is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Major Drilling and Nascent Wine

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

The idea behind Major Drilling Group and Nascent Wine 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.