Correlation Between Master Drilling and Prosus NV

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

Diversification Opportunities for Master Drilling and Prosus NV

-0.41

Correlation Coefficient

Master Drilling  Prosus NV

Very good diversification

The 3 months correlation between Master and Prosus is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Master Drilling Group and Prosus NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prosus NV 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 Prosus NV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prosus NV has no effect on the direction of Master Drilling i.e., Master Drilling and Prosus NV go up and down completely randomly.

Pair Corralation between Master Drilling and Prosus NV

Assuming the 90 days trading horizon Master Drilling Group is expected to generate 1.66 times more return on investment than Prosus NV. However, Master Drilling is 1.66 times more volatile than Prosus NV. It trades about 0.03 of its potential returns per unit of risk. Prosus NV is currently generating about -0.31 per unit of risk. If you would invest  133,500  in Master Drilling Group on October 10, 2024 and sell it today you would earn a total of  1,500  from holding Master Drilling Group or generate 1.12% return on investment over 90 days.

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

Master Drilling Group  vs.  Prosus NV

Master Drilling Group

Risk-Adjusted Performance

2 of 100

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 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.

Prosus NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prosus NV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Master Drilling and Prosus NV

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

The idea behind Master Drilling Group and Prosus NV 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.