Correlation Between Major Drilling and Lendlease
Can any of the company-specific risk be diversified away by investing in both Major Drilling and Lendlease 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 Lendlease 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 Lendlease Group, you can compare the effects of market volatilities on Major Drilling and Lendlease 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 Lendlease. Check out your portfolio center. Please also check ongoing floating volatility patterns of Major Drilling and Lendlease.
Diversification Opportunities for Major Drilling and Lendlease
-0.27 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Major and Lendlease is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Major Drilling Group and Lendlease Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lendlease 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 Lendlease. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lendlease Group has no effect on the direction of Major Drilling i.e., Major Drilling and Lendlease go up and down completely randomly.
Pair Corralation between Major Drilling and Lendlease
Assuming the 90 days horizon Major Drilling Group is expected to generate 1.49 times more return on investment than Lendlease. However, Major Drilling is 1.49 times more volatile than Lendlease Group. It trades about 0.13 of its potential returns per unit of risk. Lendlease Group is currently generating about -0.03 per unit of risk. If you would invest 486.00 in Major Drilling Group on September 12, 2024 and sell it today you would earn a total of 94.00 from holding Major Drilling Group or generate 19.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Major Drilling Group vs. Lendlease Group
Performance |
| Timeline |
| Major Drilling Group |
| Lendlease Group |
Major Drilling and Lendlease Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Major Drilling and Lendlease
The main advantage of trading using opposite Major Drilling and Lendlease positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Major Drilling position performs unexpectedly, Lendlease 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 Lendlease will offset losses from the drop in Lendlease's long position.| Major Drilling vs. Focus Home Interactive | Major Drilling vs. Japan Post Insurance | Major Drilling vs. MI Homes | Major Drilling vs. INSURANCE AUST GRP |
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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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