Correlation Between Major Drilling and HUDSON TECHNOLOGY

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

Diversification Opportunities for Major Drilling and HUDSON TECHNOLOGY

-0.41
  Correlation Coefficient

Very good diversification

The 3 months correlation between Major and HUDSON is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Major Drilling Group and HUDSON TECHNOLOGY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HUDSON TECHNOLOGY 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 HUDSON TECHNOLOGY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HUDSON TECHNOLOGY has no effect on the direction of Major Drilling i.e., Major Drilling and HUDSON TECHNOLOGY go up and down completely randomly.

Pair Corralation between Major Drilling and HUDSON TECHNOLOGY

Assuming the 90 days horizon Major Drilling is expected to generate 6.05 times less return on investment than HUDSON TECHNOLOGY. But when comparing it to its historical volatility, Major Drilling Group is 2.01 times less risky than HUDSON TECHNOLOGY. It trades about 0.05 of its potential returns per unit of risk. HUDSON TECHNOLOGY is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  500.00  in HUDSON TECHNOLOGY on September 7, 2024 and sell it today you would earn a total of  60.00  from holding HUDSON TECHNOLOGY or generate 12.0% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Major Drilling Group  vs.  HUDSON TECHNOLOGY

 Performance 
       Timeline  
Major Drilling Group 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
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 fragile basic indicators, Major Drilling reported solid returns over the last few months and may actually be approaching a breakup point.
HUDSON TECHNOLOGY 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days HUDSON TECHNOLOGY has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Major Drilling and HUDSON TECHNOLOGY Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Major Drilling and HUDSON TECHNOLOGY

The main advantage of trading using opposite Major Drilling and HUDSON TECHNOLOGY positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Major Drilling position performs unexpectedly, HUDSON TECHNOLOGY 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 HUDSON TECHNOLOGY will offset losses from the drop in HUDSON TECHNOLOGY's long position.
The idea behind Major Drilling Group and HUDSON TECHNOLOGY 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.

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