Correlation Between Major Drilling and 83001WAC8

Can any of the company-specific risk be diversified away by investing in both Major Drilling and 83001WAC8 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 83001WAC8 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 Six Flags Theme, you can compare the effects of market volatilities on Major Drilling and 83001WAC8 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 83001WAC8. Check out your portfolio center. Please also check ongoing floating volatility patterns of Major Drilling and 83001WAC8.

Diversification Opportunities for Major Drilling and 83001WAC8

-0.14

Correlation Coefficient

Major Drilling  83001WAC8

Good diversification

The 3 months correlation between Major and 83001WAC8 is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Major Drilling Group and Six Flags Theme in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Six Flags Theme 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 83001WAC8. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Six Flags Theme has no effect on the direction of Major Drilling i.e., Major Drilling and 83001WAC8 go up and down completely randomly.

Pair Corralation between Major Drilling and 83001WAC8

Assuming the 90 days horizon Major Drilling Group is expected to under-perform the 83001WAC8. In addition to that, Major Drilling is 18.0 times more volatile than Six Flags Theme. It trades about -0.02 of its total potential returns per unit of risk. Six Flags Theme is currently generating about 0.03 per unit of volatility. If you would invest  10,008  in Six Flags Theme on December 24, 2024 and sell it today you would earn a total of  10.00  from holding Six Flags Theme or generate 0.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	41.67%
Values	Daily Returns

Major Drilling Group  vs.  Six Flags Theme

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.

Six Flags Theme

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Six Flags Theme are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, 83001WAC8 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Major Drilling and 83001WAC8

The main advantage of trading using opposite Major Drilling and 83001WAC8 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Major Drilling position performs unexpectedly, 83001WAC8 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 83001WAC8 will offset losses from the drop in 83001WAC8's long position.

The idea behind Major Drilling Group and Six Flags Theme 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.