Correlation Between Master Drilling and Aveng

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

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

Diversification Opportunities for Master Drilling and Aveng

-0.23

Correlation Coefficient

Master Drilling  Aveng

Very good diversification

The 3 months correlation between Master and Aveng is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Master Drilling Group and Aveng in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aveng and Master Drilling 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 Master Drilling Group are associated (or correlated) with Aveng. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aveng has no effect on the direction of Master Drilling i.e., Master Drilling and Aveng go up and down completely randomly.

Pair Corralation between Master Drilling and Aveng

Assuming the 90 days trading horizon Master Drilling Group is expected to generate 0.88 times more return on investment than Aveng. However, Master Drilling Group is 1.14 times less risky than Aveng. It trades about 0.03 of its potential returns per unit of risk. Aveng is currently generating about -0.2 per unit of risk. If you would invest  130,400  in Master Drilling Group on December 21, 2024 and sell it today you would earn a total of  4,600  from holding Master Drilling Group or generate 3.53% return on investment over 90 days.

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

Master Drilling Group  vs.  Aveng

Master Drilling Group

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Master Drilling Group are ranked lower than 2 (%) 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 April 2025.

Aveng

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Master Drilling and Aveng

The main advantage of trading using opposite Master Drilling and Aveng positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Master Drilling position performs unexpectedly, Aveng 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 Aveng will offset losses from the drop in Aveng's long position.

The idea behind Master Drilling Group and Aveng 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.