Correlation Between AUTO TRADER and Major Drilling
Can any of the company-specific risk be diversified away by investing in both AUTO TRADER 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 AUTO TRADER and Major Drilling into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AUTO TRADER ADR and Major Drilling Group, you can compare the effects of market volatilities on AUTO TRADER 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 AUTO TRADER with a short position of Major Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of AUTO TRADER and Major Drilling.
Diversification Opportunities for AUTO TRADER and Major Drilling
-0.21 | Correlation Coefficient |
Very good diversification
The 3 months correlation between AUTO and Major is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding AUTO TRADER ADR 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 AUTO TRADER 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 AUTO TRADER ADR 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 AUTO TRADER i.e., AUTO TRADER and Major Drilling go up and down completely randomly.
Pair Corralation between AUTO TRADER and Major Drilling
Assuming the 90 days trading horizon AUTO TRADER ADR is expected to generate 0.55 times more return on investment than Major Drilling. However, AUTO TRADER ADR is 1.8 times less risky than Major Drilling. It trades about 0.05 of its potential returns per unit of risk. Major Drilling Group is currently generating about -0.03 per unit of risk. If you would invest 228.00 in AUTO TRADER ADR on September 2, 2024 and sell it today you would earn a total of 20.00 from holding AUTO TRADER ADR or generate 8.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
AUTO TRADER ADR vs. Major Drilling Group
Performance |
| Timeline |
| AUTO TRADER ADR |
| Major Drilling Group |
AUTO TRADER and Major Drilling Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AUTO TRADER and Major Drilling
The main advantage of trading using opposite AUTO TRADER and Major Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AUTO TRADER 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.| AUTO TRADER vs. SERI INDUSTRIAL EO | AUTO TRADER vs. Evolution Mining Limited | AUTO TRADER vs. Corporate Travel Management | AUTO TRADER vs. ADRIATIC METALS LS 013355 |
| Major Drilling vs. BHP Group Limited | Major Drilling vs. Rio Tinto Group | Major Drilling vs. Vale SA | Major Drilling vs. Vale SA |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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