Correlation Between Stewart Information and Major Drilling
Can any of the company-specific risk be diversified away by investing in both Stewart Information 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 Stewart Information and Major Drilling into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Stewart Information Services and Major Drilling Group, you can compare the effects of market volatilities on Stewart Information 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 Stewart Information with a short position of Major Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stewart Information and Major Drilling.
Diversification Opportunities for Stewart Information and Major Drilling
0.19 | Correlation Coefficient |
Average diversification
The 3 months correlation between Stewart and Major is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Stewart Information Services 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 Stewart Information 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 Stewart Information Services 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 Stewart Information i.e., Stewart Information and Major Drilling go up and down completely randomly.
Pair Corralation between Stewart Information and Major Drilling
Assuming the 90 days horizon Stewart Information Services is expected to generate 0.73 times more return on investment than Major Drilling. However, Stewart Information Services is 1.36 times less risky than Major Drilling. It trades about 0.11 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 4,154 in Stewart Information Services on September 1, 2024 and sell it today you would earn a total of 2,746 from holding Stewart Information Services or generate 66.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Stewart Information Services vs. Major Drilling Group
Performance |
| Timeline |
| Stewart Information |
| Major Drilling Group |
Stewart Information and Major Drilling Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Stewart Information and Major Drilling
The main advantage of trading using opposite Stewart Information and Major Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stewart Information 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.| Stewart Information vs. Singapore Telecommunications Limited | Stewart Information vs. Harmony Gold Mining | Stewart Information vs. Verizon Communications | Stewart Information vs. Chesapeake Utilities |
| 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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