Correlation Between Master Drilling and Ascendis Health

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

Diversification Opportunities for Master Drilling and Ascendis Health

0.14

Correlation Coefficient

Master Drilling  Ascendis Health

Average diversification

The 3 months correlation between Master and Ascendis is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Master Drilling Group and Ascendis Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ascendis Health 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 Ascendis Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ascendis Health has no effect on the direction of Master Drilling i.e., Master Drilling and Ascendis Health go up and down completely randomly.

Pair Corralation between Master Drilling and Ascendis Health

Assuming the 90 days trading horizon Master Drilling Group is expected to generate 0.61 times more return on investment than Ascendis Health. However, Master Drilling Group is 1.63 times less risky than Ascendis Health. It trades about 0.1 of its potential returns per unit of risk. Ascendis Health is currently generating about 0.05 per unit of risk. If you would invest  125,800  in Master Drilling Group on September 3, 2024 and sell it today you would earn a total of  11,200  from holding Master Drilling Group or generate 8.9% return on investment over 90 days.

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

Master Drilling Group  vs.  Ascendis Health

Master Drilling Group

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Master Drilling Group are ranked lower than 7 (%) 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.

Ascendis Health

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ascendis Health are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, Ascendis Health may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Master Drilling and Ascendis Health

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

The idea behind Master Drilling Group and Ascendis Health 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.