Correlation Between Major Drilling and Huaneng Power
Can any of the company-specific risk be diversified away by investing in both Major Drilling and Huaneng Power 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 Huaneng Power 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 Huaneng Power International, you can compare the effects of market volatilities on Major Drilling and Huaneng Power 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 Huaneng Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Major Drilling and Huaneng Power.
Diversification Opportunities for Major Drilling and Huaneng Power
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Major and Huaneng is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Major Drilling Group and Huaneng Power International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Huaneng Power Intern 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 Huaneng Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Huaneng Power Intern has no effect on the direction of Major Drilling i.e., Major Drilling and Huaneng Power go up and down completely randomly.
Pair Corralation between Major Drilling and Huaneng Power
Assuming the 90 days horizon Major Drilling Group is expected to under-perform the Huaneng Power. But the stock apears to be less risky and, when comparing its historical volatility, Major Drilling Group is 1.78 times less risky than Huaneng Power. The stock trades about -0.01 of its potential returns per unit of risk. The Huaneng Power International is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 28.00 in Huaneng Power International on October 13, 2024 and sell it today you would earn a total of 19.00 from holding Huaneng Power International or generate 67.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Major Drilling Group vs. Huaneng Power International
Performance |
| Timeline |
| Major Drilling Group |
| Huaneng Power Intern |
Major Drilling and Huaneng Power Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Major Drilling and Huaneng Power
The main advantage of trading using opposite Major Drilling and Huaneng Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Major Drilling position performs unexpectedly, Huaneng Power 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 Huaneng Power will offset losses from the drop in Huaneng Power's long position.| Major Drilling vs. OFFICE DEPOT | Major Drilling vs. RYU Apparel | Major Drilling vs. VITEC SOFTWARE GROUP | Major Drilling vs. KENEDIX OFFICE INV |
| Huaneng Power vs. Major Drilling Group | Huaneng Power vs. CVW CLEANTECH INC | Huaneng Power vs. Pembina Pipeline Corp | Huaneng Power vs. China BlueChemical |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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