Correlation Between Major Drilling and Fastenal

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

Diversification Opportunities for Major Drilling and Fastenal

0.28

Correlation Coefficient

Major Drilling  Fastenal

Modest diversification

The 3 months correlation between Major and Fastenal is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Major Drilling Group and Fastenal Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fastenal 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 Fastenal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fastenal has no effect on the direction of Major Drilling i.e., Major Drilling and Fastenal go up and down completely randomly.

Pair Corralation between Major Drilling and Fastenal

Assuming the 90 days horizon Major Drilling is expected to generate 2.26 times less return on investment than Fastenal. In addition to that, Major Drilling is 2.03 times more volatile than Fastenal Company. It trades about 0.03 of its total potential returns per unit of risk. Fastenal Company is currently generating about 0.16 per unit of volatility. If you would invest  3,578  in Fastenal Company on May 13, 2025 and sell it today you would earn a total of  475.00  from holding Fastenal Company or generate 13.28% return on investment over 90 days.

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

Major Drilling Group  vs.  Fastenal Company

Major Drilling Group

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Major Drilling Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Major Drilling is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Fastenal

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fastenal Company are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Fastenal may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Major Drilling and Fastenal

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

The idea behind Major Drilling Group and Fastenal Company 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.