Correlation Between Reinet Investments and Master Drilling

Can any of the company-specific risk be diversified away by investing in both Reinet Investments and Master Drilling 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 Reinet Investments and Master Drilling into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Reinet Investments SCA and Master Drilling Group, you can compare the effects of market volatilities on Reinet Investments and Master Drilling 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 Reinet Investments with a short position of Master Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of Reinet Investments and Master Drilling.

Diversification Opportunities for Reinet Investments and Master Drilling

0.38

Correlation Coefficient

Reinet Investments  Master Drilling

Weak diversification

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

Pair Corralation between Reinet Investments and Master Drilling

Assuming the 90 days trading horizon Reinet Investments SCA is expected to under-perform the Master Drilling. But the stock apears to be less risky and, when comparing its historical volatility, Reinet Investments SCA is 1.52 times less risky than Master Drilling. The stock trades about -0.01 of its potential returns per unit of risk. The Master Drilling Group is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  127,000  in Master Drilling Group on September 16, 2024 and sell it today you would earn a total of  3,500  from holding Master Drilling Group or generate 2.76% return on investment over 90 days.

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

Reinet Investments SCA  vs.  Master Drilling Group

Reinet Investments SCA

Risk-Adjusted Performance

0 of 100

Very Weak

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

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 newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Reinet Investments and Master Drilling

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

The idea behind Reinet Investments SCA and Master Drilling Group 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.