Correlation Between Master Drilling and MTN
Can any of the company-specific risk be diversified away by investing in both Master Drilling and MTN 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 MTN 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 MTN Group, you can compare the effects of market volatilities on Master Drilling and MTN 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 MTN. Check out your portfolio center. Please also check ongoing floating volatility patterns of Master Drilling and MTN.
Diversification Opportunities for Master Drilling and MTN
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Master and MTN is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Master Drilling Group and MTN Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MTN Group 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 MTN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MTN Group has no effect on the direction of Master Drilling i.e., Master Drilling and MTN go up and down completely randomly.
Pair Corralation between Master Drilling and MTN
Assuming the 90 days trading horizon Master Drilling Group is expected to generate 1.21 times more return on investment than MTN. However, Master Drilling is 1.21 times more volatile than MTN Group. It trades about 0.05 of its potential returns per unit of risk. MTN Group is currently generating about -0.28 per unit of risk. If you would invest 135,000 in Master Drilling Group on September 2, 2024 and sell it today you would earn a total of 2,000 from holding Master Drilling Group or generate 1.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Master Drilling Group vs. MTN Group
Performance |
| Timeline |
| Master Drilling Group |
| MTN Group |
Master Drilling and MTN Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Master Drilling and MTN
The main advantage of trading using opposite Master Drilling and MTN positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Master Drilling position performs unexpectedly, MTN 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 MTN will offset losses from the drop in MTN's long position.| Master Drilling vs. Prosus NV | Master Drilling vs. British American Tobacco | Master Drilling vs. Glencore PLC | Master Drilling vs. Anglo American PLC |
| MTN vs. Master Drilling Group | MTN vs. British American Tobacco | MTN vs. HomeChoice Investments | MTN vs. Lesaka Technologies |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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