Correlation Between International Consolidated and Major Drilling
Can any of the company-specific risk be diversified away by investing in both International Consolidated 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 International Consolidated and Major Drilling into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between International Consolidated Airlines and Major Drilling Group, you can compare the effects of market volatilities on International Consolidated 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 International Consolidated with a short position of Major Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Consolidated and Major Drilling.
Diversification Opportunities for International Consolidated and Major Drilling
-0.16 | Correlation Coefficient |
Good diversification
The 3 months correlation between International and Major is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding International Consolidated Air 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 International Consolidated 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 International Consolidated Airlines 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 International Consolidated i.e., International Consolidated and Major Drilling go up and down completely randomly.
Pair Corralation between International Consolidated and Major Drilling
Assuming the 90 days horizon International Consolidated Airlines is expected to generate 0.9 times more return on investment than Major Drilling. However, International Consolidated Airlines is 1.11 times less risky than Major Drilling. It trades about 0.25 of its potential returns per unit of risk. Major Drilling Group is currently generating about 0.09 per unit of risk. If you would invest 250.00 in International Consolidated Airlines on August 25, 2024 and sell it today you would earn a total of 35.00 from holding International Consolidated Airlines or generate 14.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
International Consolidated Air vs. Major Drilling Group
Performance |
| Timeline |
| International Consolidated |
| Major Drilling Group |
International Consolidated and Major Drilling Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with International Consolidated and Major Drilling
The main advantage of trading using opposite International Consolidated and Major Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Consolidated 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.| International Consolidated vs. Coeur Mining | International Consolidated vs. Mitsubishi Gas Chemical | International Consolidated vs. Quaker Chemical | International Consolidated vs. Calibre Mining Corp |
| Major Drilling vs. NTG Nordic Transport | Major Drilling vs. TYSON FOODS A | Major Drilling vs. SENECA FOODS A | Major Drilling vs. Gaztransport Technigaz SA |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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