Correlation Between Fortress Income and Master Drilling

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

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

Diversification Opportunities for Fortress Income and Master Drilling

-0.45

Correlation Coefficient

Fortress Income  Master Drilling

Very good diversification

The 3 months correlation between Fortress and Master is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Fortress Income 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 Fortress Income 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 Fortress Income 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 Fortress Income i.e., Fortress Income and Master Drilling go up and down completely randomly.

Pair Corralation between Fortress Income and Master Drilling

Assuming the 90 days trading horizon Fortress Income is expected to generate 2.0 times less return on investment than Master Drilling. But when comparing it to its historical volatility, Fortress Income is 4.42 times less risky than Master Drilling. It trades about 0.06 of its potential returns per unit of risk. Master Drilling Group is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  135,100  in Master Drilling Group on October 4, 2024 and sell it today you would earn a total of  800.00  from holding Master Drilling Group or generate 0.59% return on investment over 90 days.

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

Fortress Income  vs.  Master Drilling Group

Fortress Income

Risk-Adjusted Performance

0 of 100

Very Weak

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

Master Drilling Group

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Master Drilling Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Master Drilling may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Fortress Income and Master Drilling

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

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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.