Correlation Between Major Drilling and Apple

Can any of the company-specific risk be diversified away by investing in both Major Drilling and Apple 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 Major Drilling and Apple into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Major Drilling Group and Apple Inc, you can compare the effects of market volatilities on Major Drilling and Apple 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 Major Drilling with a short position of Apple. Check out your portfolio center. Please also check ongoing floating volatility patterns of Major Drilling and Apple.

Diversification Opportunities for Major Drilling and Apple

0.59

Correlation Coefficient

Major Drilling  Apple

Very weak diversification

The 3 months correlation between Major and Apple is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Major Drilling Group and Apple Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Apple Inc and Major Drilling 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 Major Drilling Group are associated (or correlated) with Apple. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Apple Inc has no effect on the direction of Major Drilling i.e., Major Drilling and Apple go up and down completely randomly.

Pair Corralation between Major Drilling and Apple

Assuming the 90 days horizon Major Drilling Group is expected to under-perform the Apple. In addition to that, Major Drilling is 3.12 times more volatile than Apple Inc. It trades about -0.12 of its total potential returns per unit of risk. Apple Inc is currently generating about 0.58 per unit of volatility. If you would invest  22,045  in Apple Inc on September 23, 2024 and sell it today you would earn a total of  2,070  from holding Apple Inc or generate 9.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Major Drilling Group  vs.  Apple Inc

Major Drilling Group

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Major Drilling Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Major Drilling is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Apple Inc

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady fundamental indicators, Apple unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Major Drilling and Apple

The main advantage of trading using opposite Major Drilling and Apple positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Major Drilling position performs unexpectedly, Apple 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 Apple will offset losses from the drop in Apple's long position.

The idea behind Major Drilling Group and Apple Inc 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.

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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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.