Correlation Between Master Drilling and Redefine Properties

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

Diversification Opportunities for Master Drilling and Redefine Properties

0.09

Correlation Coefficient

Master Drilling  Redefine Properties

Significant diversification

The 3 months correlation between Master and Redefine is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Master Drilling Group and Redefine Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Redefine Properties 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 Redefine Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Redefine Properties has no effect on the direction of Master Drilling i.e., Master Drilling and Redefine Properties go up and down completely randomly.

Pair Corralation between Master Drilling and Redefine Properties

Assuming the 90 days trading horizon Master Drilling Group is expected to generate 1.38 times more return on investment than Redefine Properties. However, Master Drilling is 1.38 times more volatile than Redefine Properties. It trades about 0.03 of its potential returns per unit of risk. Redefine Properties is currently generating about 0.04 per unit of risk. If you would invest  125,000  in Master Drilling Group on October 7, 2024 and sell it today you would earn a total of  12,000  from holding Master Drilling Group or generate 9.6% return on investment over 90 days.

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

Master Drilling Group  vs.  Redefine Properties

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.

Redefine Properties

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Redefine Properties 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 Redefine Properties

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

The idea behind Master Drilling Group and Redefine Properties 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..