Correlation Between Major Drilling and Bunzl Plc
Can any of the company-specific risk be diversified away by investing in both Major Drilling and Bunzl Plc 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 Bunzl Plc 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 Bunzl plc, you can compare the effects of market volatilities on Major Drilling and Bunzl Plc 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 Bunzl Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Major Drilling and Bunzl Plc.
Diversification Opportunities for Major Drilling and Bunzl Plc
-0.06 | Correlation Coefficient |
Good diversification
The 3 months correlation between Major and Bunzl is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Major Drilling Group and Bunzl plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bunzl plc 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 Bunzl Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bunzl plc has no effect on the direction of Major Drilling i.e., Major Drilling and Bunzl Plc go up and down completely randomly.
Pair Corralation between Major Drilling and Bunzl Plc
Assuming the 90 days horizon Major Drilling Group is expected to generate 2.16 times more return on investment than Bunzl Plc. However, Major Drilling is 2.16 times more volatile than Bunzl plc. It trades about 0.06 of its potential returns per unit of risk. Bunzl plc is currently generating about 0.13 per unit of risk. If you would invest 550.00 in Major Drilling Group on September 13, 2024 and sell it today you would earn a total of 30.00 from holding Major Drilling Group or generate 5.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Major Drilling Group vs. Bunzl plc
Performance |
| Timeline |
| Major Drilling Group |
| Bunzl plc |
Major Drilling and Bunzl Plc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Major Drilling and Bunzl Plc
The main advantage of trading using opposite Major Drilling and Bunzl Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Major Drilling position performs unexpectedly, Bunzl Plc 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 Bunzl Plc will offset losses from the drop in Bunzl Plc's long position.| Major Drilling vs. BHP Group Limited | Major Drilling vs. Vale SA | Major Drilling vs. Superior Plus Corp | Major Drilling vs. SIVERS SEMICONDUCTORS AB |
| Bunzl Plc vs. INTERSHOP Communications Aktiengesellschaft | Bunzl Plc vs. Major Drilling Group | Bunzl Plc vs. T MOBILE US | Bunzl Plc vs. Consolidated Communications Holdings |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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