Correlation Between Major Drilling and China BlueChemical
Can any of the company-specific risk be diversified away by investing in both Major Drilling and China BlueChemical 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 China BlueChemical 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 China BlueChemical, you can compare the effects of market volatilities on Major Drilling and China BlueChemical 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 China BlueChemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Major Drilling and China BlueChemical.
Diversification Opportunities for Major Drilling and China BlueChemical
0.08 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Major and China is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Major Drilling Group and China BlueChemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China BlueChemical 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 China BlueChemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China BlueChemical has no effect on the direction of Major Drilling i.e., Major Drilling and China BlueChemical go up and down completely randomly.
Pair Corralation between Major Drilling and China BlueChemical
Assuming the 90 days horizon Major Drilling Group is expected to under-perform the China BlueChemical. But the stock apears to be less risky and, when comparing its historical volatility, Major Drilling Group is 1.62 times less risky than China BlueChemical. The stock trades about -0.01 of its potential returns per unit of risk. The China BlueChemical is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 23.00 in China BlueChemical on October 27, 2024 and sell it today you would earn a total of 4.00 from holding China BlueChemical or generate 17.39% 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. China BlueChemical
Performance |
| Timeline |
| Major Drilling Group |
| China BlueChemical |
Major Drilling and China BlueChemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Major Drilling and China BlueChemical
The main advantage of trading using opposite Major Drilling and China BlueChemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Major Drilling position performs unexpectedly, China BlueChemical 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 China BlueChemical will offset losses from the drop in China BlueChemical's long position.| Major Drilling vs. Penta Ocean Construction Co | Major Drilling vs. SOCKET MOBILE NEW | Major Drilling vs. Highlight Communications AG | Major Drilling vs. Charter Communications |
| China BlueChemical vs. Chengdu PUTIAN Telecommunications | China BlueChemical vs. X FAB Silicon Foundries | China BlueChemical vs. Tower One Wireless | China BlueChemical vs. TRI CHEMICAL LABORATINC |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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