Correlation Between Major Drilling and FARM 51
Can any of the company-specific risk be diversified away by investing in both Major Drilling and FARM 51 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 FARM 51 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 FARM 51 GROUP, you can compare the effects of market volatilities on Major Drilling and FARM 51 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 FARM 51. Check out your portfolio center. Please also check ongoing floating volatility patterns of Major Drilling and FARM 51.
Diversification Opportunities for Major Drilling and FARM 51
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Major and FARM is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Major Drilling Group and FARM 51 GROUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FARM 51 GROUP 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 FARM 51. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FARM 51 GROUP has no effect on the direction of Major Drilling i.e., Major Drilling and FARM 51 go up and down completely randomly.
Pair Corralation between Major Drilling and FARM 51
Assuming the 90 days horizon Major Drilling is expected to generate 1.79 times less return on investment than FARM 51. But when comparing it to its historical volatility, Major Drilling Group is 1.28 times less risky than FARM 51. It trades about 0.02 of its potential returns per unit of risk. FARM 51 GROUP is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 302.00 in FARM 51 GROUP on October 26, 2024 and sell it today you would earn a total of 5.00 from holding FARM 51 GROUP or generate 1.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Major Drilling Group vs. FARM 51 GROUP
Performance |
| Timeline |
| Major Drilling Group |
| FARM 51 GROUP |
Major Drilling and FARM 51 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Major Drilling and FARM 51
The main advantage of trading using opposite Major Drilling and FARM 51 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Major Drilling position performs unexpectedly, FARM 51 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 FARM 51 will offset losses from the drop in FARM 51's long position.| Major Drilling vs. Gaztransport Technigaz SA | Major Drilling vs. FRACTAL GAMING GROUP | Major Drilling vs. TRAINLINE PLC LS | Major Drilling vs. Gold Road Resources |
| FARM 51 vs. GEAR4MUSIC LS 10 | FARM 51 vs. BANKINTER ADR 2007 | FARM 51 vs. Check Point Software | FARM 51 vs. Kingdee International Software |
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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