Correlation Between Major Drilling and Arbor Metals

Can any of the company-specific risk be diversified away by investing in both Major Drilling and Arbor Metals 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 Arbor Metals 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 Arbor Metals Corp, you can compare the effects of market volatilities on Major Drilling and Arbor Metals 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 Arbor Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Major Drilling and Arbor Metals.

Diversification Opportunities for Major Drilling and Arbor Metals

-0.53

Correlation Coefficient

Major Drilling  Arbor Metals

Excellent diversification

The 3 months correlation between Major and Arbor is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Major Drilling Group and Arbor Metals Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arbor Metals Corp 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 Arbor Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arbor Metals Corp has no effect on the direction of Major Drilling i.e., Major Drilling and Arbor Metals go up and down completely randomly.

Pair Corralation between Major Drilling and Arbor Metals

Assuming the 90 days trading horizon Major Drilling Group is expected to generate 0.37 times more return on investment than Arbor Metals. However, Major Drilling Group is 2.73 times less risky than Arbor Metals. It trades about 0.0 of its potential returns per unit of risk. Arbor Metals Corp is currently generating about -0.09 per unit of risk. If you would invest  924.00  in Major Drilling Group on September 12, 2024 and sell it today you would lose (47.00) from holding Major Drilling Group or give up 5.09% of portfolio value over 90 days.

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

Major Drilling Group  vs.  Arbor Metals Corp

Major Drilling Group

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Major Drilling Group are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal forward indicators, Major Drilling may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Arbor Metals Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arbor Metals Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Major Drilling and Arbor Metals

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

The idea behind Major Drilling Group and Arbor Metals Corp 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.