Correlation Between Major Drilling and Peabody Energy
Can any of the company-specific risk be diversified away by investing in both Major Drilling and Peabody Energy 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 Peabody Energy 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 Peabody Energy, you can compare the effects of market volatilities on Major Drilling and Peabody Energy 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 Peabody Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Major Drilling and Peabody Energy.
Diversification Opportunities for Major Drilling and Peabody Energy
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Major and Peabody is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Major Drilling Group and Peabody Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Peabody Energy 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 Peabody Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Peabody Energy has no effect on the direction of Major Drilling i.e., Major Drilling and Peabody Energy go up and down completely randomly.
Pair Corralation between Major Drilling and Peabody Energy
Assuming the 90 days horizon Major Drilling Group is expected to under-perform the Peabody Energy. In addition to that, Major Drilling is 1.04 times more volatile than Peabody Energy. It trades about -0.02 of its total potential returns per unit of risk. Peabody Energy is currently generating about 0.04 per unit of volatility. If you would invest 2,026 in Peabody Energy on September 3, 2024 and sell it today you would earn a total of 247.00 from holding Peabody Energy or generate 12.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Major Drilling Group vs. Peabody Energy
Performance |
| Timeline |
| Major Drilling Group |
| Peabody Energy |
Major Drilling and Peabody Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Major Drilling and Peabody Energy
The main advantage of trading using opposite Major Drilling and Peabody Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Major Drilling position performs unexpectedly, Peabody Energy 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 Peabody Energy will offset losses from the drop in Peabody Energy's long position.| Major Drilling vs. Commercial Vehicle Group | Major Drilling vs. Citic Telecom International | Major Drilling vs. Hemisphere Energy Corp | Major Drilling vs. Spirent Communications plc |
| Peabody Energy vs. American Eagle Outfitters | Peabody Energy vs. CECO ENVIRONMENTAL | Peabody Energy vs. BlueScope Steel Limited | Peabody Energy vs. Grand Canyon Education |
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 Stocks Directory module to find actively traded stocks across global markets.
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