Correlation Between Master Drilling and Naspers

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

Diversification Opportunities for Master Drilling and Naspers

0.53

Correlation Coefficient

Master Drilling  Naspers

Very weak diversification

The 3 months correlation between Master and Naspers is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Master Drilling Group and Naspers Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Naspers Limited 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 Naspers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Naspers Limited has no effect on the direction of Master Drilling i.e., Master Drilling and Naspers go up and down completely randomly.

Pair Corralation between Master Drilling and Naspers

Assuming the 90 days trading horizon Master Drilling is expected to generate 5.01 times less return on investment than Naspers. But when comparing it to its historical volatility, Master Drilling Group is 1.23 times less risky than Naspers. It trades about 0.05 of its potential returns per unit of risk. Naspers Limited is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  35,031,300  in Naspers Limited on September 12, 2024 and sell it today you would earn a total of  8,663,700  from holding Naspers Limited or generate 24.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Master Drilling Group  vs.  Naspers Limited

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 sound technical and fundamental indicators, Master Drilling is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Naspers Limited

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Naspers Limited are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Naspers exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Master Drilling and Naspers

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

The idea behind Master Drilling Group and Naspers Limited 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.