Correlation Between SCANSOURCE and Major Drilling
Can any of the company-specific risk be diversified away by investing in both SCANSOURCE 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 SCANSOURCE and Major Drilling into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SCANSOURCE and Major Drilling Group, you can compare the effects of market volatilities on SCANSOURCE 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 SCANSOURCE with a short position of Major Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of SCANSOURCE and Major Drilling.
Diversification Opportunities for SCANSOURCE and Major Drilling
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between SCANSOURCE and Major is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding SCANSOURCE 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 SCANSOURCE 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 SCANSOURCE 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 SCANSOURCE i.e., SCANSOURCE and Major Drilling go up and down completely randomly.
Pair Corralation between SCANSOURCE and Major Drilling
Assuming the 90 days trading horizon SCANSOURCE is expected to generate 1.02 times more return on investment than Major Drilling. However, SCANSOURCE is 1.02 times more volatile than Major Drilling Group. It trades about 0.19 of its potential returns per unit of risk. Major Drilling Group is currently generating about 0.02 per unit of risk. If you would invest 3,880 in SCANSOURCE on October 1, 2024 and sell it today you would earn a total of 780.00 from holding SCANSOURCE or generate 20.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SCANSOURCE vs. Major Drilling Group
Performance |
| Timeline |
| SCANSOURCE |
| Major Drilling Group |
SCANSOURCE and Major Drilling Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SCANSOURCE and Major Drilling
The main advantage of trading using opposite SCANSOURCE and Major Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SCANSOURCE 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 SCANSOURCE 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. BHP Group Limited | Major Drilling vs. Rio Tinto Group | Major Drilling vs. Rio Tinto Group | Major Drilling vs. Vale SA |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
Other Complementary Tools
| Financial Widgets Easily integrated Macroaxis content with over 30 different plug-and-play financial widgets | |
| Commodity Channel Use Commodity Channel Index to analyze current equity momentum | |
| Global Correlations Find global opportunities by holding instruments from different markets | |
| Idea Optimizer Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio | |
| Portfolio Dashboard Portfolio dashboard that provides centralized access to all your investments |