Correlation Between Master Drilling and HomeChoice Investments

Can any of the company-specific risk be diversified away by investing in both Master Drilling and HomeChoice Investments 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 HomeChoice Investments 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 HomeChoice Investments, you can compare the effects of market volatilities on Master Drilling and HomeChoice Investments 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 HomeChoice Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Master Drilling and HomeChoice Investments.

Diversification Opportunities for Master Drilling and HomeChoice Investments

0.0

Correlation Coefficient

Master Drilling  HomeChoice Investments

Pay attention - limited upside

The 3 months correlation between Master and HomeChoice is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Master Drilling Group and HomeChoice Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HomeChoice Investments 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 HomeChoice Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HomeChoice Investments has no effect on the direction of Master Drilling i.e., Master Drilling and HomeChoice Investments go up and down completely randomly.

Pair Corralation between Master Drilling and HomeChoice Investments

Assuming the 90 days trading horizon Master Drilling is expected to generate 10.07 times less return on investment than HomeChoice Investments. But when comparing it to its historical volatility, Master Drilling Group is 1.23 times less risky than HomeChoice Investments. It trades about 0.0 of its potential returns per unit of risk. HomeChoice Investments is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  241,642  in HomeChoice Investments on September 19, 2024 and sell it today you would earn a total of  58,358  from holding HomeChoice Investments or generate 24.15% return on investment over 90 days.

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

Master Drilling Group  vs.  HomeChoice Investments

Master Drilling Group

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Master Drilling Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

HomeChoice Investments

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HomeChoice Investments 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 January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Master Drilling and HomeChoice Investments

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

The idea behind Master Drilling Group and HomeChoice Investments 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.