Correlation Between Major Drilling and Magellan Health

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

Diversification Opportunities for Major Drilling and Magellan Health

0.0

Correlation Coefficient

Major Drilling  Magellan Health

Pay attention - limited upside

The 3 months correlation between Major and Magellan is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Major Drilling Group and Magellan Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magellan Health 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 Magellan Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Magellan Health has no effect on the direction of Major Drilling i.e., Major Drilling and Magellan Health go up and down completely randomly.

Pair Corralation between Major Drilling and Magellan Health

If you would invest (100.00) in Magellan Health on January 31, 2024 and sell it today you would earn a total of  100.00  from holding Magellan Health or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Major Drilling Group  vs.  Magellan Health

Major Drilling Group

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Major Drilling Group are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak essential indicators, Major Drilling reported solid returns over the last few months and may actually be approaching a breakup point.

Magellan Health

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Magellan Health has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy essential indicators, Magellan Health is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Major Drilling and Magellan Health

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

The idea behind Major Drilling Group and Magellan Health 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.