Correlation Between Glencore PLC and Master Drilling

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

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

Diversification Opportunities for Glencore PLC and Master Drilling

-0.08

Correlation Coefficient

Glencore PLC  Master Drilling

Good diversification

The 3 months correlation between Glencore and Master is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Glencore PLC 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 Glencore PLC 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 Glencore PLC 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 Glencore PLC i.e., Glencore PLC and Master Drilling go up and down completely randomly.

Pair Corralation between Glencore PLC and Master Drilling

Assuming the 90 days trading horizon Glencore PLC is expected to under-perform the Master Drilling. In addition to that, Glencore PLC is 1.13 times more volatile than Master Drilling Group. It trades about -0.01 of its total potential returns per unit of risk. Master Drilling Group is currently generating about 0.07 per unit of volatility. If you would invest  127,000  in Master Drilling Group on September 4, 2024 and sell it today you would earn a total of  8,100  from holding Master Drilling Group or generate 6.38% return on investment over 90 days.

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

Glencore PLC  vs.  Master Drilling Group

Glencore PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Glencore PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Glencore PLC 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

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Master Drilling Group are ranked lower than 5 (%) 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 January 2025.

Pair Trading with Glencore PLC and Master Drilling

The main advantage of trading using opposite Glencore PLC and Master Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Glencore PLC 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 Glencore PLC 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.

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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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.