Correlation Between Lendlease and Major Drilling
Can any of the company-specific risk be diversified away by investing in both Lendlease 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 Lendlease and Major Drilling into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lendlease Group and Major Drilling Group, you can compare the effects of market volatilities on Lendlease 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 Lendlease with a short position of Major Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lendlease and Major Drilling.
Diversification Opportunities for Lendlease and Major Drilling
-0.27 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Lendlease and Major is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Lendlease Group 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 Lendlease 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 Lendlease Group 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 Lendlease i.e., Lendlease and Major Drilling go up and down completely randomly.
Pair Corralation between Lendlease and Major Drilling
Assuming the 90 days trading horizon Lendlease Group is expected to under-perform the Major Drilling. But the stock apears to be less risky and, when comparing its historical volatility, Lendlease Group is 1.49 times less risky than Major Drilling. The stock trades about -0.03 of its potential returns per unit of risk. The Major Drilling Group is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 486.00 in Major Drilling Group on September 12, 2024 and sell it today you would earn a total of 94.00 from holding Major Drilling Group or generate 19.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lendlease Group vs. Major Drilling Group
Performance |
| Timeline |
| Lendlease Group |
| Major Drilling Group |
Lendlease and Major Drilling Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lendlease and Major Drilling
The main advantage of trading using opposite Lendlease and Major Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lendlease 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 Lendlease Group 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. Focus Home Interactive | Major Drilling vs. Japan Post Insurance | Major Drilling vs. MI Homes | Major Drilling vs. INSURANCE AUST GRP |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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