Correlation Between Master Drilling and Tiger Brands

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

Diversification Opportunities for Master Drilling and Tiger Brands

-0.38

Correlation Coefficient

Master Drilling  Tiger Brands

Very good diversification

The 3 months correlation between Master and Tiger is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Master Drilling Group and Tiger Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tiger Brands 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 Tiger Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tiger Brands has no effect on the direction of Master Drilling i.e., Master Drilling and Tiger Brands go up and down completely randomly.

Pair Corralation between Master Drilling and Tiger Brands

Assuming the 90 days trading horizon Master Drilling Group is expected to under-perform the Tiger Brands. In addition to that, Master Drilling is 1.56 times more volatile than Tiger Brands. It trades about -0.08 of its total potential returns per unit of risk. Tiger Brands is currently generating about 0.53 per unit of volatility. If you would invest  2,510,000  in Tiger Brands on September 27, 2024 and sell it today you would earn a total of  400,400  from holding Tiger Brands or generate 15.95% 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.  Tiger Brands

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.

Tiger Brands

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tiger Brands are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Tiger Brands exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Master Drilling and Tiger Brands

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

The idea behind Master Drilling Group and Tiger Brands 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.