Correlation Between Master Drilling and We Buy

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

Diversification Opportunities for Master Drilling and We Buy

-0.19

Correlation Coefficient

Master Drilling  We Buy

Good diversification

The 3 months correlation between Master and WBC is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Master Drilling Group and We Buy Cars in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on We Buy Cars 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 We Buy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of We Buy Cars has no effect on the direction of Master Drilling i.e., Master Drilling and We Buy go up and down completely randomly.

Pair Corralation between Master Drilling and We Buy

Assuming the 90 days trading horizon Master Drilling is expected to generate 7.75 times less return on investment than We Buy. In addition to that, Master Drilling is 1.19 times more volatile than We Buy Cars. It trades about 0.02 of its total potential returns per unit of risk. We Buy Cars is currently generating about 0.19 per unit of volatility. If you would invest  202,891  in We Buy Cars on December 4, 2024 and sell it today you would earn a total of  247,709  from holding We Buy Cars or generate 122.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	45.71%
Values	Daily Returns

Master Drilling Group  vs.  We Buy Cars

Master Drilling Group

Risk-Adjusted Performance

Weak

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 April 2025.

We Buy Cars

Risk-Adjusted Performance

Very Weak

Over the last 90 days We Buy Cars has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, We Buy is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Master Drilling and We Buy

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

The idea behind Master Drilling Group and We Buy Cars 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.