Correlation Between Major Drilling and Sigma Lithium
Can any of the company-specific risk be diversified away by investing in both Major Drilling and Sigma Lithium 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 Sigma Lithium 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 Sigma Lithium Resources, you can compare the effects of market volatilities on Major Drilling and Sigma Lithium 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 Sigma Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Major Drilling and Sigma Lithium.
Diversification Opportunities for Major Drilling and Sigma Lithium
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Major and Sigma is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Major Drilling Group and Sigma Lithium Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sigma Lithium Resources 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 Sigma Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sigma Lithium Resources has no effect on the direction of Major Drilling i.e., Major Drilling and Sigma Lithium go up and down completely randomly.
Pair Corralation between Major Drilling and Sigma Lithium
Assuming the 90 days trading horizon Major Drilling Group is expected to generate 0.55 times more return on investment than Sigma Lithium. However, Major Drilling Group is 1.83 times less risky than Sigma Lithium. It trades about 0.04 of its potential returns per unit of risk. Sigma Lithium Resources is currently generating about -0.05 per unit of risk. If you would invest 741.00 in Major Drilling Group on September 14, 2024 and sell it today you would earn a total of 123.00 from holding Major Drilling Group or generate 16.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.63% |
| Values | Daily Returns |
Major Drilling Group vs. Sigma Lithium Resources
Performance |
| Timeline |
| Major Drilling Group |
| Sigma Lithium Resources |
Major Drilling and Sigma Lithium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Major Drilling and Sigma Lithium
The main advantage of trading using opposite Major Drilling and Sigma Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Major Drilling position performs unexpectedly, Sigma Lithium 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 Sigma Lithium will offset losses from the drop in Sigma Lithium's long position.| Major Drilling vs. Pason Systems | Major Drilling vs. HudBay Minerals | Major Drilling vs. Ensign Energy Services | Major Drilling vs. Precision Drilling |
| Sigma Lithium vs. Foraco International SA | Sigma Lithium vs. Geodrill Limited | Sigma Lithium vs. Major Drilling Group | Sigma Lithium vs. Bri Chem Corp |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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