Correlation Between Major Drilling and Komatsu
Can any of the company-specific risk be diversified away by investing in both Major Drilling and Komatsu 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 Komatsu 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 Komatsu, you can compare the effects of market volatilities on Major Drilling and Komatsu 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 Komatsu. Check out your portfolio center. Please also check ongoing floating volatility patterns of Major Drilling and Komatsu.
Diversification Opportunities for Major Drilling and Komatsu
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Major and Komatsu is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Major Drilling Group and Komatsu in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Komatsu 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 Komatsu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Komatsu has no effect on the direction of Major Drilling i.e., Major Drilling and Komatsu go up and down completely randomly.
Pair Corralation between Major Drilling and Komatsu
Assuming the 90 days horizon Major Drilling Group is expected to generate 1.24 times more return on investment than Komatsu. However, Major Drilling is 1.24 times more volatile than Komatsu. It trades about 0.05 of its potential returns per unit of risk. Komatsu is currently generating about 0.03 per unit of risk. If you would invest 478.00 in Major Drilling Group on September 15, 2024 and sell it today you would earn a total of 127.00 from holding Major Drilling Group or generate 26.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.64% |
| Values | Daily Returns |
Major Drilling Group vs. Komatsu
Performance |
| Timeline |
| Major Drilling Group |
| Komatsu |
Major Drilling and Komatsu Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Major Drilling and Komatsu
The main advantage of trading using opposite Major Drilling and Komatsu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Major Drilling position performs unexpectedly, Komatsu 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 Komatsu will offset losses from the drop in Komatsu'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 |
| Komatsu vs. Shenandoah Telecommunications | Komatsu vs. Addus HomeCare | Komatsu vs. Tower One Wireless | Komatsu vs. Major Drilling Group |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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