Correlation Between Major Drilling and Vale SA
Can any of the company-specific risk be diversified away by investing in both Major Drilling and Vale SA 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 Vale SA 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 Vale SA, you can compare the effects of market volatilities on Major Drilling and Vale SA 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 Vale SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Major Drilling and Vale SA.
Diversification Opportunities for Major Drilling and Vale SA
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Major and Vale is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Major Drilling Group and Vale SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vale SA 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 Vale SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vale SA has no effect on the direction of Major Drilling i.e., Major Drilling and Vale SA go up and down completely randomly.
Pair Corralation between Major Drilling and Vale SA
Assuming the 90 days horizon Major Drilling Group is expected to generate 1.16 times more return on investment than Vale SA. However, Major Drilling is 1.16 times more volatile than Vale SA. It trades about -0.01 of its potential returns per unit of risk. Vale SA is currently generating about -0.02 per unit of risk. If you would invest 675.00 in Major Drilling Group on September 3, 2024 and sell it today you would lose (125.00) from holding Major Drilling Group or give up 18.52% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Major Drilling Group vs. Vale SA
Performance |
| Timeline |
| Major Drilling Group |
| Vale SA |
Major Drilling and Vale SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Major Drilling and Vale SA
The main advantage of trading using opposite Major Drilling and Vale SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Major Drilling position performs unexpectedly, Vale SA 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 Vale SA will offset losses from the drop in Vale SA's long position.| Major Drilling vs. Commercial Vehicle Group | Major Drilling vs. Citic Telecom International | Major Drilling vs. Hemisphere Energy Corp | Major Drilling vs. Spirent Communications plc |
| Vale SA vs. Commonwealth Bank of | Vale SA vs. JAPAN TOBACCO UNSPADR12 | Vale SA vs. BRIT AMER TOBACCO | Vale SA vs. UNIVMUSIC GRPADR050 |
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 CEOs Directory module to screen CEOs from public companies around the world.
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