Correlation Between Rocket Internet and Major Drilling
Can any of the company-specific risk be diversified away by investing in both Rocket Internet 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 Rocket Internet and Major Drilling into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rocket Internet SE and Major Drilling Group, you can compare the effects of market volatilities on Rocket Internet 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 Rocket Internet with a short position of Major Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rocket Internet and Major Drilling.
Diversification Opportunities for Rocket Internet and Major Drilling
-0.02 | Correlation Coefficient |
Good diversification
The 3 months correlation between Rocket and Major is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Rocket Internet SE 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 Rocket Internet 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 Rocket Internet SE 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 Rocket Internet i.e., Rocket Internet and Major Drilling go up and down completely randomly.
Pair Corralation between Rocket Internet and Major Drilling
Assuming the 90 days trading horizon Rocket Internet SE is expected to under-perform the Major Drilling. But the stock apears to be less risky and, when comparing its historical volatility, Rocket Internet SE is 1.26 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 -0.02 of returns per unit of risk over similar time horizon. If you would invest 760.00 in Major Drilling Group on October 11, 2024 and sell it today you would lose (210.00) from holding Major Drilling Group or give up 27.63% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Rocket Internet SE vs. Major Drilling Group
Performance |
| Timeline |
| Rocket Internet SE |
| Major Drilling Group |
Rocket Internet and Major Drilling Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rocket Internet and Major Drilling
The main advantage of trading using opposite Rocket Internet and Major Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rocket Internet 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 effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against Rocket Internet as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. Rocket Internet's systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, Rocket Internet's unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to Rocket Internet SE.
| Major Drilling vs. Zoom Video Communications | Major Drilling vs. MCEWEN MINING INC | Major Drilling vs. ARDAGH METAL PACDL 0001 | Major Drilling vs. Rocket Internet SE |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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