Correlation Between Western Investment and Major Drilling
Can any of the company-specific risk be diversified away by investing in both Western Investment 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 Western Investment and Major Drilling into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Investment and Major Drilling Group, you can compare the effects of market volatilities on Western Investment 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 Western Investment with a short position of Major Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Investment and Major Drilling.
Diversification Opportunities for Western Investment and Major Drilling
-0.25 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Western and Major is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Western Investment 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 Western Investment 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 Western Investment 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 Western Investment i.e., Western Investment and Major Drilling go up and down completely randomly.
Pair Corralation between Western Investment and Major Drilling
Given the investment horizon of 90 days Western Investment is expected to under-perform the Major Drilling. In addition to that, Western Investment is 1.55 times more volatile than Major Drilling Group. It trades about -0.04 of its total potential returns per unit of risk. Major Drilling Group is currently generating about 0.13 per unit of volatility. If you would invest 825.00 in Major Drilling Group on November 2, 2024 and sell it today you would earn a total of 40.00 from holding Major Drilling Group or generate 4.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Investment vs. Major Drilling Group
Performance |
| Timeline |
| Western Investment |
| Major Drilling Group |
Western Investment and Major Drilling Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Investment and Major Drilling
The main advantage of trading using opposite Western Investment and Major Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Investment 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.| Western Investment vs. Uniteds Limited | Western Investment vs. Economic Investment Trust | Western Investment vs. Clairvest Group | Western Investment vs. Cogeco Inc |
| Major Drilling vs. Pason Systems | Major Drilling vs. HudBay Minerals | Major Drilling vs. Ensign Energy Services | Major Drilling vs. Precision Drilling |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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