Correlation Between Master Drilling and Standard Bank
Can any of the company-specific risk be diversified away by investing in both Master Drilling and Standard Bank 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 Standard Bank 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 Standard Bank Group, you can compare the effects of market volatilities on Master Drilling and Standard Bank 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 Standard Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Master Drilling and Standard Bank.
Diversification Opportunities for Master Drilling and Standard Bank
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Master and Standard is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Master Drilling Group and Standard Bank Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Standard Bank 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 Standard Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Standard Bank Group has no effect on the direction of Master Drilling i.e., Master Drilling and Standard Bank go up and down completely randomly.
Pair Corralation between Master Drilling and Standard Bank
Assuming the 90 days trading horizon Master Drilling Group is expected to generate 1.73 times more return on investment than Standard Bank. However, Master Drilling is 1.73 times more volatile than Standard Bank Group. It trades about 0.03 of its potential returns per unit of risk. Standard Bank Group is currently generating about 0.04 per unit of risk. If you would invest 126,000 in Master Drilling Group on August 27, 2024 and sell it today you would earn a total of 10,800 from holding Master Drilling Group or generate 8.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Master Drilling Group vs. Standard Bank Group
Performance |
| Timeline |
| Master Drilling Group |
| Standard Bank Group |
Master Drilling and Standard Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Master Drilling and Standard Bank
The main advantage of trading using opposite Master Drilling and Standard Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Master Drilling position performs unexpectedly, Standard Bank 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 Standard Bank will offset losses from the drop in Standard Bank's long position.| Master Drilling vs. City Lodge Hotels | Master Drilling vs. Bytes Technology | Master Drilling vs. Ascendis Health | Master Drilling vs. Copper 360 |
| Standard Bank vs. Investec Limited NON | Standard Bank vs. Sasol Ltd Bee | Standard Bank vs. Centaur Bci Balanced | Standard Bank vs. Sabvest Capital |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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