Correlation Between British Amer and Master Drilling
Can any of the company-specific risk be diversified away by investing in both British Amer and Master 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 British Amer and Master Drilling into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between British American Tobacco and Master Drilling Group, you can compare the effects of market volatilities on British Amer and Master 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 British Amer with a short position of Master Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of British Amer and Master Drilling.
Diversification Opportunities for British Amer and Master Drilling
-0.33 | Correlation Coefficient |
Very good diversification
The 3 months correlation between British and Master is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding British American Tobacco and Master Drilling Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Master Drilling Group and British Amer 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 British American Tobacco are associated (or correlated) with Master Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Master Drilling Group has no effect on the direction of British Amer i.e., British Amer and Master Drilling go up and down completely randomly.
Pair Corralation between British Amer and Master Drilling
Assuming the 90 days trading horizon British American Tobacco is expected to generate 0.58 times more return on investment than Master Drilling. However, British American Tobacco is 1.73 times less risky than Master Drilling. It trades about 0.03 of its potential returns per unit of risk. Master Drilling Group is currently generating about 0.02 per unit of risk. If you would invest 5,900,417 in British American Tobacco on August 28, 2024 and sell it today you would earn a total of 863,883 from holding British American Tobacco or generate 14.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
British American Tobacco vs. Master Drilling Group
Performance |
| Timeline |
| British American Tobacco |
| Master Drilling Group |
British Amer and Master Drilling Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with British Amer and Master Drilling
The main advantage of trading using opposite British Amer and Master Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if British Amer position performs unexpectedly, Master 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 Master Drilling will offset losses from the drop in Master Drilling's long position.| British Amer vs. Safari Investments RSA | British Amer vs. African Media Entertainment | British Amer vs. HomeChoice Investments | British Amer vs. Reinet Investments SCA |
| Master Drilling vs. Lesaka Technologies | Master Drilling vs. Zeder Investments | Master Drilling vs. Advtech | Master Drilling vs. Safari Investments RSA |
Check out your portfolio center.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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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