Correlation Between Pembina Pipeline and Major Drilling
Can any of the company-specific risk be diversified away by investing in both Pembina Pipeline 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 Pembina Pipeline and Major Drilling into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pembina Pipeline Corp and Major Drilling Group, you can compare the effects of market volatilities on Pembina Pipeline 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 Pembina Pipeline with a short position of Major Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pembina Pipeline and Major Drilling.
Diversification Opportunities for Pembina Pipeline and Major Drilling
-0.05 | Correlation Coefficient |
Good diversification
The 3 months correlation between Pembina and Major is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Pembina Pipeline Corp 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 Pembina Pipeline 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 Pembina Pipeline Corp 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 Pembina Pipeline i.e., Pembina Pipeline and Major Drilling go up and down completely randomly.
Pair Corralation between Pembina Pipeline and Major Drilling
Assuming the 90 days horizon Pembina Pipeline Corp is expected to generate 0.4 times more return on investment than Major Drilling. However, Pembina Pipeline Corp is 2.47 times less risky than Major Drilling. It trades about 0.17 of its potential returns per unit of risk. Major Drilling Group is currently generating about 0.04 per unit of risk. If you would invest 2,777 in Pembina Pipeline Corp on August 26, 2024 and sell it today you would earn a total of 1,375 from holding Pembina Pipeline Corp or generate 49.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pembina Pipeline Corp vs. Major Drilling Group
Performance |
| Timeline |
| Pembina Pipeline Corp |
| Major Drilling Group |
Pembina Pipeline and Major Drilling Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pembina Pipeline and Major Drilling
The main advantage of trading using opposite Pembina Pipeline and Major Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pembina Pipeline 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.| Pembina Pipeline vs. Kinder Morgan | Pembina Pipeline vs. The Williams Companies | Pembina Pipeline vs. ONEOK Inc | Pembina Pipeline vs. Targa Resources Corp |
| Major Drilling vs. BHP Group Limited | Major Drilling vs. Superior Plus Corp | Major Drilling vs. NMI Holdings | Major Drilling vs. Origin Agritech |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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