Correlation Between Retail Estates and Major Drilling

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

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

Diversification Opportunities for Retail Estates and Major Drilling

-0.39

Correlation Coefficient

Retail Estates  Major Drilling

Very good diversification

The 3 months correlation between Retail and Major is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Retail Estates NV and Major Drilling Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Major Drilling Group and Retail Estates 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 Retail Estates NV are associated (or correlated) with Major Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Major Drilling Group has no effect on the direction of Retail Estates i.e., Retail Estates and Major Drilling go up and down completely randomly.

Pair Corralation between Retail Estates and Major Drilling

Assuming the 90 days horizon Retail Estates NV is expected to generate 0.55 times more return on investment than Major Drilling. However, Retail Estates NV is 1.81 times less risky than Major Drilling. It trades about 0.03 of its potential returns per unit of risk. Major Drilling Group is currently generating about -0.02 per unit of risk. If you would invest  5,133  in Retail Estates NV on December 20, 2024 and sell it today you would earn a total of  797.00  from holding Retail Estates NV or generate 15.53% return on investment over 90 days.

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

Retail Estates NV  vs.  Major Drilling Group

Retail Estates NV

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Retail Estates NV are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Retail Estates is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

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 basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Retail Estates and Major Drilling

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

The idea behind Retail Estates NV and Major Drilling Group 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.