Correlation Between Vantage Drilling and MYT Netherlands

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

By analyzing existing cross correlation between Vantage Drilling International and MYT Netherlands Parent, you can compare the effects of market volatilities on Vantage Drilling and MYT Netherlands 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 Vantage Drilling with a short position of MYT Netherlands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vantage Drilling and MYT Netherlands.

Diversification Opportunities for Vantage Drilling and MYT Netherlands

-0.46

Correlation Coefficient

Vantage Drilling  MYT Netherlands

Very good diversification

The 3 months correlation between Vantage and MYT is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Vantage Drilling International and MYT Netherlands Parent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MYT Netherlands Parent and Vantage 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 Vantage Drilling International are associated (or correlated) with MYT Netherlands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MYT Netherlands Parent has no effect on the direction of Vantage Drilling i.e., Vantage Drilling and MYT Netherlands go up and down completely randomly.

Pair Corralation between Vantage Drilling and MYT Netherlands

Assuming the 90 days horizon Vantage Drilling International is expected to under-perform the MYT Netherlands. But the pink sheet apears to be less risky and, when comparing its historical volatility, Vantage Drilling International is 8.98 times less risky than MYT Netherlands. The pink sheet trades about -0.16 of its potential returns per unit of risk. The MYT Netherlands Parent is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  697.00  in MYT Netherlands Parent on October 26, 2024 and sell it today you would earn a total of  230.00  from holding MYT Netherlands Parent or generate 33.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	97.5%
Values	Daily Returns

Vantage Drilling International  vs.  MYT Netherlands Parent

Vantage Drilling Int

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vantage Drilling International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Vantage Drilling is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

MYT Netherlands Parent

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MYT Netherlands Parent are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal basic indicators, MYT Netherlands exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vantage Drilling and MYT Netherlands

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

The idea behind Vantage Drilling International and MYT Netherlands Parent 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.