Correlation Between Magna Mining and Precision Drilling

Can any of the company-specific risk be diversified away by investing in both Magna Mining and Precision Drilling 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 Magna Mining and Precision Drilling into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Magna Mining and Precision Drilling, you can compare the effects of market volatilities on Magna Mining and Precision Drilling 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 Magna Mining with a short position of Precision Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of Magna Mining and Precision Drilling.

Diversification Opportunities for Magna Mining and Precision Drilling

-0.08

Correlation Coefficient

Magna Mining  Precision Drilling

Good diversification

The 3 months correlation between Magna and Precision is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Magna Mining and Precision Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Precision Drilling and Magna Mining 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 Magna Mining are associated (or correlated) with Precision Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Precision Drilling has no effect on the direction of Magna Mining i.e., Magna Mining and Precision Drilling go up and down completely randomly.

Pair Corralation between Magna Mining and Precision Drilling

Assuming the 90 days trading horizon Magna Mining is expected to generate 1.74 times more return on investment than Precision Drilling. However, Magna Mining is 1.74 times more volatile than Precision Drilling. It trades about 0.05 of its potential returns per unit of risk. Precision Drilling is currently generating about -0.23 per unit of risk. If you would invest  139.00  in Magna Mining on December 12, 2024 and sell it today you would earn a total of  11.00  from holding Magna Mining or generate 7.91% return on investment over 90 days.

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

Magna Mining  vs.  Precision Drilling

Magna Mining

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Magna Mining are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal fundamental indicators, Magna Mining may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Precision Drilling

Risk-Adjusted Performance

Very Weak

Over the last 90 days Precision Drilling has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Magna Mining and Precision Drilling

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

The idea behind Magna Mining and Precision Drilling 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.