Correlation Between Pembina Pipeline and Major Drilling

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

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

Diversification Opportunities for Pembina Pipeline and Major Drilling

0.32

Correlation Coefficient

Pembina Pipeline  Major Drilling

Weak diversification

The 3 months correlation between Pembina and Major is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Pembina Pipeline Corp 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 Pembina Pipeline 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 Pembina Pipeline Corp 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 Pembina Pipeline i.e., Pembina Pipeline and Major Drilling go up and down completely randomly.

Pair Corralation between Pembina Pipeline and Major Drilling

Assuming the 90 days horizon Pembina Pipeline Corp is expected to generate 0.42 times more return on investment than Major Drilling. However, Pembina Pipeline Corp is 2.39 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 -0.05 per unit of risk. If you would invest  3,569  in Pembina Pipeline Corp on September 3, 2024 and sell it today you would earn a total of  314.00  from holding Pembina Pipeline Corp or generate 8.8% return on investment over 90 days.

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

Pembina Pipeline Corp  vs.  Major Drilling Group

Pembina Pipeline Corp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pembina Pipeline Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Pembina Pipeline may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Major Drilling Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Major Drilling Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Pembina Pipeline and Major Drilling

The main advantage of trading using opposite Pembina Pipeline and Major Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pembina Pipeline 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.

The idea behind Pembina Pipeline Corp and Major Drilling 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.