Correlation Between Amplify Energy and Diamond Offshore

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Can any of the company-specific risk be diversified away by investing in both Amplify Energy and Diamond Offshore 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 Amplify Energy and Diamond Offshore into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amplify Energy Corp and Diamond Offshore Drilling, you can compare the effects of market volatilities on Amplify Energy and Diamond Offshore 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 Amplify Energy with a short position of Diamond Offshore. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amplify Energy and Diamond Offshore.

Diversification Opportunities for Amplify Energy and Diamond Offshore

  Correlation Coefficient

Weak diversification

The 3 months correlation between Amplify and Diamond is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Amplify Energy Corp and Diamond Offshore Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diamond Offshore Drilling and Amplify Energy 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 Amplify Energy Corp are associated (or correlated) with Diamond Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diamond Offshore Drilling has no effect on the direction of Amplify Energy i.e., Amplify Energy and Diamond Offshore go up and down completely randomly.

Pair Corralation between Amplify Energy and Diamond Offshore

Given the investment horizon of 90 days Amplify Energy Corp is expected to under-perform the Diamond Offshore. In addition to that, Amplify Energy is 1.05 times more volatile than Diamond Offshore Drilling. It trades about -0.3 of its total potential returns per unit of risk. Diamond Offshore Drilling is currently generating about -0.01 per unit of volatility. If you would invest  1,250  in Diamond Offshore Drilling on January 1, 2023 and sell it today you would lose (46.00)  from holding Diamond Offshore Drilling or give up 3.68% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
ValuesDaily Returns

Amplify Energy Corp  vs.  Diamond Offshore Drilling

 Performance (%) 
Amplify Energy Corp 

Amplify Performance

0 of 100

Over the last 90 days Amplify Energy Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.
Diamond Offshore Drilling 

Diamond Performance

8 of 100

Compared to the overall equity markets, risk-adjusted returns on investments in Diamond Offshore Drilling are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, Diamond Offshore displayed solid returns over the last few months and may actually be approaching a breakup point.

Amplify Energy and Diamond Offshore Volatility Contrast

   Predicted Return Density   

Pair Trading with Amplify Energy and Diamond Offshore

The main advantage of trading using opposite Amplify Energy and Diamond Offshore positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amplify Energy position performs unexpectedly, Diamond Offshore 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 Diamond Offshore will offset losses from the drop in Diamond Offshore's long position.
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The idea behind Amplify Energy Corp and Diamond Offshore Drilling 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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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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.

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