Correlation Between Aspen Pharmacare and Master Drilling

Can any of the company-specific risk be diversified away by investing in both Aspen Pharmacare 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 Aspen Pharmacare and Master Drilling into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Aspen Pharmacare Holdings and Master Drilling Group, you can compare the effects of market volatilities on Aspen Pharmacare 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 Aspen Pharmacare with a short position of Master Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aspen Pharmacare and Master Drilling.

Diversification Opportunities for Aspen Pharmacare and Master Drilling

0.17

Correlation Coefficient

Aspen Pharmacare  Master Drilling

Average diversification

The 3 months correlation between Aspen and Master is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Aspen Pharmacare Holdings 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 Aspen Pharmacare 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 Aspen Pharmacare Holdings 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 Aspen Pharmacare i.e., Aspen Pharmacare and Master Drilling go up and down completely randomly.

Pair Corralation between Aspen Pharmacare and Master Drilling

Assuming the 90 days trading horizon Aspen Pharmacare Holdings is expected to under-perform the Master Drilling. But the stock apears to be less risky and, when comparing its historical volatility, Aspen Pharmacare Holdings is 1.78 times less risky than Master Drilling. The stock trades about -0.17 of its potential returns per unit of risk. The Master Drilling Group is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  136,000  in Master Drilling Group on October 11, 2024 and sell it today you would lose (1,000.00) from holding Master Drilling Group or give up 0.74% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Aspen Pharmacare Holdings  vs.  Master Drilling Group

Aspen Pharmacare Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aspen Pharmacare Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Master Drilling Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Master Drilling Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Master Drilling is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Aspen Pharmacare and Master Drilling

The main advantage of trading using opposite Aspen Pharmacare and Master Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aspen Pharmacare 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.

The idea behind Aspen Pharmacare Holdings and Master Drilling Group pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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.