Correlation Between InPlay Oil and Major Drilling
Can any of the company-specific risk be diversified away by investing in both InPlay Oil and Major Drilling 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 InPlay Oil and Major Drilling into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between InPlay Oil Corp and Major Drilling Group, you can compare the effects of market volatilities on InPlay Oil and Major Drilling 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 InPlay Oil with a short position of Major Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of InPlay Oil and Major Drilling.
Diversification Opportunities for InPlay Oil and Major Drilling
-0.11 | Correlation Coefficient |
Good diversification
The 3 months correlation between InPlay and Major is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding InPlay Oil Corp and Major Drilling Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Major Drilling Group and InPlay Oil 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 InPlay Oil Corp are associated (or correlated) with Major Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Major Drilling Group has no effect on the direction of InPlay Oil i.e., InPlay Oil and Major Drilling go up and down completely randomly.
Pair Corralation between InPlay Oil and Major Drilling
Assuming the 90 days trading horizon InPlay Oil Corp is expected to under-perform the Major Drilling. But the stock apears to be less risky and, when comparing its historical volatility, InPlay Oil Corp is 1.12 times less risky than Major Drilling. The stock trades about -0.02 of its potential returns per unit of risk. The Major Drilling Group is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 710.00 in Major Drilling Group on September 4, 2024 and sell it today you would lose (160.00) from holding Major Drilling Group or give up 22.54% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.8% |
| Values | Daily Returns |
InPlay Oil Corp vs. Major Drilling Group
Performance |
| Timeline |
| InPlay Oil Corp |
| Major Drilling Group |
InPlay Oil and Major Drilling Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with InPlay Oil and Major Drilling
The main advantage of trading using opposite InPlay Oil and Major Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if InPlay Oil position performs unexpectedly, Major Drilling 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 Major Drilling will offset losses from the drop in Major Drilling's long position.The idea behind InPlay Oil Corp and Major Drilling Group pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Major Drilling vs. Direct Line Insurance | Major Drilling vs. National Health Investors | Major Drilling vs. REVO INSURANCE SPA | Major Drilling vs. SBI Insurance 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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