Correlation Between Major Drilling and Medical Facilities
Can any of the company-specific risk be diversified away by investing in both Major Drilling and Medical Facilities 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 Major Drilling and Medical Facilities into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Major Drilling Group and Medical Facilities, you can compare the effects of market volatilities on Major Drilling and Medical Facilities 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 Major Drilling with a short position of Medical Facilities. Check out your portfolio center. Please also check ongoing floating volatility patterns of Major Drilling and Medical Facilities.
Diversification Opportunities for Major Drilling and Medical Facilities
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Major and Medical is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Major Drilling Group and Medical Facilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medical Facilities and Major Drilling 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 Major Drilling Group are associated (or correlated) with Medical Facilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medical Facilities has no effect on the direction of Major Drilling i.e., Major Drilling and Medical Facilities go up and down completely randomly.
Pair Corralation between Major Drilling and Medical Facilities
Assuming the 90 days trading horizon Major Drilling Group is expected to generate 2.34 times more return on investment than Medical Facilities. However, Major Drilling is 2.34 times more volatile than Medical Facilities. It trades about 0.16 of its potential returns per unit of risk. Medical Facilities is currently generating about 0.24 per unit of risk. If you would invest 838.00 in Major Drilling Group on November 27, 2024 and sell it today you would earn a total of 52.00 from holding Major Drilling Group or generate 6.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Major Drilling Group vs. Medical Facilities
Performance |
| Timeline |
| Major Drilling Group |
| Medical Facilities |
Major Drilling and Medical Facilities Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Major Drilling and Medical Facilities
The main advantage of trading using opposite Major Drilling and Medical Facilities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Major Drilling position performs unexpectedly, Medical Facilities 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 Medical Facilities will offset losses from the drop in Medical Facilities' long position.| Major Drilling vs. Pason Systems | Major Drilling vs. HudBay Minerals | Major Drilling vs. Ensign Energy Services | Major Drilling vs. Precision Drilling |
| Medical Facilities vs. Extendicare | Medical Facilities vs. Sienna Senior Living | Medical Facilities vs. Rogers Sugar | Medical Facilities vs. Chemtrade Logistics Income |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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