Correlation Between Major Drilling and MTY Food

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

Diversification Opportunities for Major Drilling and MTY Food

0.6

Correlation Coefficient

Major Drilling  MTY Food

Poor diversification

The 3 months correlation between Major and MTY is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Major Drilling Group and MTY Food Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MTY Food Group 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 MTY Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MTY Food Group has no effect on the direction of Major Drilling i.e., Major Drilling and MTY Food go up and down completely randomly.

Pair Corralation between Major Drilling and MTY Food

Assuming the 90 days trading horizon Major Drilling Group is expected to under-perform the MTY Food. In addition to that, Major Drilling is 1.41 times more volatile than MTY Food Group. It trades about -0.03 of its total potential returns per unit of risk. MTY Food Group is currently generating about 0.06 per unit of volatility. If you would invest  4,571  in MTY Food Group on September 21, 2024 and sell it today you would earn a total of  157.00  from holding MTY Food Group or generate 3.43% return on investment over 90 days.

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

Major Drilling Group  vs.  MTY Food Group

Major Drilling Group

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Major Drilling Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy forward indicators, Major Drilling is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

MTY Food Group

Risk-Adjusted Performance

4 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in MTY Food Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, MTY Food is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Major Drilling and MTY Food

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

The idea behind Major Drilling Group and MTY Food 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.

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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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.