Correlation Between Boxer Retail and Master Drilling

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

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

Diversification Opportunities for Boxer Retail and Master Drilling

0.22

Correlation Coefficient

Boxer Retail  Master Drilling

Modest diversification

The 3 months correlation between Boxer and Master is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Boxer Retail 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 Boxer Retail 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 Boxer Retail 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 Boxer Retail i.e., Boxer Retail and Master Drilling go up and down completely randomly.

Pair Corralation between Boxer Retail and Master Drilling

Assuming the 90 days trading horizon Boxer Retail is expected to generate 1.27 times less return on investment than Master Drilling. But when comparing it to its historical volatility, Boxer Retail is 2.13 times less risky than Master Drilling. It trades about 0.13 of its potential returns per unit of risk. Master Drilling Group is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  123,000  in Master Drilling Group on December 27, 2024 and sell it today you would earn a total of  17,100  from holding Master Drilling Group or generate 13.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Boxer Retail  vs.  Master Drilling Group

Boxer Retail

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Boxer Retail are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Boxer Retail exhibited solid returns over the last few months and may actually be approaching a breakup point.

Master Drilling Group

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Master Drilling Group are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Master Drilling exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Boxer Retail and Master Drilling

The main advantage of trading using opposite Boxer Retail and Master Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Boxer Retail 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 Boxer Retail 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.