Correlation Between Major Drilling and LEGACY IRON
Can any of the company-specific risk be diversified away by investing in both Major Drilling and LEGACY IRON 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 LEGACY IRON 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 LEGACY IRON ORE, you can compare the effects of market volatilities on Major Drilling and LEGACY IRON 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 LEGACY IRON. Check out your portfolio center. Please also check ongoing floating volatility patterns of Major Drilling and LEGACY IRON.
Diversification Opportunities for Major Drilling and LEGACY IRON
-0.13 | Correlation Coefficient |
Good diversification
The 3 months correlation between Major and LEGACY is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Major Drilling Group and LEGACY IRON ORE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LEGACY IRON ORE 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 LEGACY IRON. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LEGACY IRON ORE has no effect on the direction of Major Drilling i.e., Major Drilling and LEGACY IRON go up and down completely randomly.
Pair Corralation between Major Drilling and LEGACY IRON
Assuming the 90 days horizon Major Drilling Group is expected to generate 3.14 times more return on investment than LEGACY IRON. However, Major Drilling is 3.14 times more volatile than LEGACY IRON ORE. It trades about -0.02 of its potential returns per unit of risk. LEGACY IRON ORE is currently generating about -0.09 per unit of risk. If you would invest 655.00 in Major Drilling Group on August 28, 2024 and sell it today you would lose (75.00) from holding Major Drilling Group or give up 11.45% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Major Drilling Group vs. LEGACY IRON ORE
Performance |
| Timeline |
| Major Drilling Group |
| LEGACY IRON ORE |
Major Drilling and LEGACY IRON Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Major Drilling and LEGACY IRON
The main advantage of trading using opposite Major Drilling and LEGACY IRON positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Major Drilling position performs unexpectedly, LEGACY IRON 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 LEGACY IRON will offset losses from the drop in LEGACY IRON's long position.| Major Drilling vs. Superior Plus Corp | Major Drilling vs. NMI Holdings | Major Drilling vs. Origin Agritech | Major Drilling vs. SIVERS SEMICONDUCTORS AB |
| LEGACY IRON vs. Apple Inc | LEGACY IRON vs. Apple Inc | LEGACY IRON vs. Microsoft | LEGACY IRON vs. Microsoft |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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