Correlation Between Glencore PLC and Major Drilling
Can any of the company-specific risk be diversified away by investing in both Glencore PLC 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 Glencore PLC and Major Drilling into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Glencore PLC and Major Drilling Group, you can compare the effects of market volatilities on Glencore PLC 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 Glencore PLC with a short position of Major Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of Glencore PLC and Major Drilling.
Diversification Opportunities for Glencore PLC and Major Drilling
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Glencore and Major is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Glencore PLC 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 Glencore PLC 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 Glencore PLC 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 Glencore PLC i.e., Glencore PLC and Major Drilling go up and down completely randomly.
Pair Corralation between Glencore PLC and Major Drilling
Assuming the 90 days horizon Glencore PLC is expected to under-perform the Major Drilling. But the stock apears to be less risky and, when comparing its historical volatility, Glencore PLC is 1.19 times less risky than Major Drilling. The stock trades about -0.09 of its potential returns per unit of risk. The Major Drilling Group is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 535.00 in Major Drilling Group on September 5, 2024 and sell it today you would earn a total of 35.00 from holding Major Drilling Group or generate 6.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Glencore PLC vs. Major Drilling Group
Performance |
| Timeline |
| Glencore PLC |
| Major Drilling Group |
Glencore PLC and Major Drilling Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Glencore PLC and Major Drilling
The main advantage of trading using opposite Glencore PLC and Major Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Glencore PLC 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 Glencore PLC 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.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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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