Correlation Between Master Drilling and British Amer
Can any of the company-specific risk be diversified away by investing in both Master Drilling and British Amer 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 Master Drilling and British Amer into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Master Drilling Group and British American Tobacco, you can compare the effects of market volatilities on Master Drilling and British Amer 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 Master Drilling with a short position of British Amer. Check out your portfolio center. Please also check ongoing floating volatility patterns of Master Drilling and British Amer.
Diversification Opportunities for Master Drilling and British Amer
-0.33 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Master and British is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Master Drilling Group and British American Tobacco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on British American Tobacco and Master 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 Master Drilling Group are associated (or correlated) with British Amer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of British American Tobacco has no effect on the direction of Master Drilling i.e., Master Drilling and British Amer go up and down completely randomly.
Pair Corralation between Master Drilling and British Amer
Assuming the 90 days trading horizon Master Drilling Group is expected to under-perform the British Amer. In addition to that, Master Drilling is 1.65 times more volatile than British American Tobacco. It trades about -0.06 of its total potential returns per unit of risk. British American Tobacco is currently generating about 0.42 per unit of volatility. If you would invest 6,154,700 in British American Tobacco on August 28, 2024 and sell it today you would earn a total of 609,600 from holding British American Tobacco or generate 9.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Master Drilling Group vs. British American Tobacco
Performance |
| Timeline |
| Master Drilling Group |
| British American Tobacco |
Master Drilling and British Amer Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Master Drilling and British Amer
The main advantage of trading using opposite Master Drilling and British Amer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Master Drilling position performs unexpectedly, British Amer 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 British Amer will offset losses from the drop in British Amer's long position.| Master Drilling vs. Lesaka Technologies | Master Drilling vs. Zeder Investments | Master Drilling vs. Advtech | Master Drilling vs. Safari Investments RSA |
| British Amer vs. Safari Investments RSA | British Amer vs. African Media Entertainment | British Amer vs. HomeChoice Investments | British Amer vs. Reinet Investments SCA |
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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