Correlation Between CHINA OIL and Major Drilling
Can any of the company-specific risk be diversified away by investing in both CHINA 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 CHINA 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 CHINA OIL AND and Major Drilling Group, you can compare the effects of market volatilities on CHINA 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 CHINA OIL with a short position of Major Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of CHINA OIL and Major Drilling.
Diversification Opportunities for CHINA OIL and Major Drilling
0.36 | Correlation Coefficient |
Weak diversification
The 3 months correlation between CHINA and Major is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding CHINA OIL AND 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 CHINA 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 CHINA OIL AND 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 CHINA OIL i.e., CHINA OIL and Major Drilling go up and down completely randomly.
Pair Corralation between CHINA OIL and Major Drilling
Assuming the 90 days trading horizon CHINA OIL AND is expected to generate 0.15 times more return on investment than Major Drilling. However, CHINA OIL AND is 6.53 times less risky than Major Drilling. It trades about 0.09 of its potential returns per unit of risk. Major Drilling Group is currently generating about -0.02 per unit of risk. If you would invest 2.20 in CHINA OIL AND on September 3, 2024 and sell it today you would earn a total of 0.10 from holding CHINA OIL AND or generate 4.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CHINA OIL AND vs. Major Drilling Group
Performance |
| Timeline |
| CHINA OIL AND |
| Major Drilling Group |
CHINA OIL and Major Drilling Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CHINA OIL and Major Drilling
The main advantage of trading using opposite CHINA OIL and Major Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CHINA 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.| CHINA OIL vs. INSURANCE AUST GRP | CHINA OIL vs. SCANSOURCE | CHINA OIL vs. Japan Post Insurance | CHINA OIL vs. QBE Insurance Group |
| Major Drilling vs. Commercial Vehicle Group | Major Drilling vs. Citic Telecom International | Major Drilling vs. Hemisphere Energy Corp | Major Drilling vs. Spirent Communications plc |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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