Correlation Between Major Drilling and Sphere Entertainment

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

Diversification Opportunities for Major Drilling and Sphere Entertainment

0.28

Correlation Coefficient

Major Drilling  Sphere Entertainment

Modest diversification

The 3 months correlation between Major and Sphere is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Major Drilling Group and Sphere Entertainment Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sphere Entertainment 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 Sphere Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sphere Entertainment has no effect on the direction of Major Drilling i.e., Major Drilling and Sphere Entertainment go up and down completely randomly.

Pair Corralation between Major Drilling and Sphere Entertainment

Assuming the 90 days horizon Major Drilling Group is expected to under-perform the Sphere Entertainment. But the pink sheet apears to be less risky and, when comparing its historical volatility, Major Drilling Group is 1.91 times less risky than Sphere Entertainment. The pink sheet trades about -0.25 of its potential returns per unit of risk. The Sphere Entertainment Co is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  3,779  in Sphere Entertainment Co on October 10, 2024 and sell it today you would earn a total of  402.00  from holding Sphere Entertainment Co or generate 10.64% return on investment over 90 days.

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

Major Drilling Group  vs.  Sphere Entertainment Co

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.

Sphere Entertainment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sphere Entertainment Co has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical indicators, Sphere Entertainment is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Major Drilling and Sphere Entertainment

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

The idea behind Major Drilling Group and Sphere Entertainment Co 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.