Correlation Between Master Drilling and Famous Brands
Can any of the company-specific risk be diversified away by investing in both Master Drilling and Famous Brands 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 Famous Brands 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 Famous Brands, you can compare the effects of market volatilities on Master Drilling and Famous Brands 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 Famous Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Master Drilling and Famous Brands.
Diversification Opportunities for Master Drilling and Famous Brands
-0.22 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Master and Famous is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Master Drilling Group and Famous Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Famous Brands 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 Famous Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Famous Brands has no effect on the direction of Master Drilling i.e., Master Drilling and Famous Brands go up and down completely randomly.
Pair Corralation between Master Drilling and Famous Brands
Assuming the 90 days trading horizon Master Drilling Group is expected to generate 2.16 times more return on investment than Famous Brands. However, Master Drilling is 2.16 times more volatile than Famous Brands. It trades about 0.07 of its potential returns per unit of risk. Famous Brands is currently generating about -0.2 per unit of risk. If you would invest 130,400 in Master Drilling Group on October 22, 2024 and sell it today you would earn a total of 4,600 from holding Master Drilling Group or generate 3.53% 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. Famous Brands
Performance |
| Timeline |
| Master Drilling Group |
| Famous Brands |
Master Drilling and Famous Brands Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Master Drilling and Famous Brands
The main advantage of trading using opposite Master Drilling and Famous Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Master Drilling position performs unexpectedly, Famous Brands 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 Famous Brands will offset losses from the drop in Famous Brands' long position.| Master Drilling vs. RCL Foods | Master Drilling vs. Reinet Investments SCA | Master Drilling vs. Safari Investments RSA | Master Drilling vs. Nedbank Group |
| Famous Brands vs. Pick N Pay | Famous Brands vs. Standard Bank Group | Famous Brands vs. Sasol Ltd Bee | Famous Brands vs. Growthpoint Properties |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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