Correlation Between Compagnie Financire and Master Drilling

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Can any of the company-specific risk be diversified away by investing in both Compagnie Financire 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 Compagnie Financire and Master Drilling into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Compagnie Financire Richemont and Master Drilling Group, you can compare the effects of market volatilities on Compagnie Financire 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 Compagnie Financire with a short position of Master Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compagnie Financire and Master Drilling.

Diversification Opportunities for Compagnie Financire and Master Drilling

-0.27
  Correlation Coefficient

Very good diversification

The 3 months correlation between Compagnie and Master is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Compagnie Financire Richemont 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 Compagnie Financire 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 Compagnie Financire Richemont 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 Compagnie Financire i.e., Compagnie Financire and Master Drilling go up and down completely randomly.

Pair Corralation between Compagnie Financire and Master Drilling

Assuming the 90 days trading horizon Compagnie Financire Richemont is expected to generate 0.97 times more return on investment than Master Drilling. However, Compagnie Financire Richemont is 1.03 times less risky than Master Drilling. It trades about 0.11 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  24,585,000  in Compagnie Financire Richemont on September 24, 2024 and sell it today you would earn a total of  2,941,900  from holding Compagnie Financire Richemont or generate 11.97% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Compagnie Financire Richemont  vs.  Master Drilling Group

 Performance 
       Timeline  
Compagnie Financire 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Compagnie Financire Richemont are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, Compagnie Financire may actually be approaching a critical reversion point that can send shares even higher in January 2025.
Master Drilling Group 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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 latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Compagnie Financire and Master Drilling Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Compagnie Financire and Master Drilling

The main advantage of trading using opposite Compagnie Financire and Master Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Compagnie Financire 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 Compagnie Financire Richemont 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.

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