Correlation Between Prosus NV and Master Drilling
Can any of the company-specific risk be diversified away by investing in both Prosus NV 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 Prosus NV and Master Drilling into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Prosus NV and Master Drilling Group, you can compare the effects of market volatilities on Prosus NV 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 Prosus NV with a short position of Master Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prosus NV and Master Drilling.
Diversification Opportunities for Prosus NV and Master Drilling
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Prosus and Master is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Prosus NV 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 Prosus NV 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 Prosus NV 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 Prosus NV i.e., Prosus NV and Master Drilling go up and down completely randomly.
Pair Corralation between Prosus NV and Master Drilling
Assuming the 90 days trading horizon Prosus NV is expected to generate 0.89 times more return on investment than Master Drilling. However, Prosus NV is 1.12 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 5,994,918 in Prosus NV on August 28, 2024 and sell it today you would earn a total of 1,215,082 from holding Prosus NV or generate 20.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Prosus NV vs. Master Drilling Group
Performance |
| Timeline |
| Prosus NV |
| Master Drilling Group |
Prosus NV and Master Drilling Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Prosus NV and Master Drilling
The main advantage of trading using opposite Prosus NV and Master Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prosus NV 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.| Prosus NV vs. Life Healthcare | Prosus NV vs. RCL Foods | Prosus NV vs. Trematon Capital Investments | Prosus NV vs. Frontier Transport Holdings |
| 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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