Correlation Between Dmc Global and Capital Drilling

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

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

Diversification Opportunities for Dmc Global and Capital Drilling

-0.04

Correlation Coefficient

Dmc Global  Capital Drilling

Good diversification

The 3 months correlation between Dmc and Capital is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Dmc Global and Capital Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Drilling and Dmc Global 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 Dmc Global are associated (or correlated) with Capital Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Drilling has no effect on the direction of Dmc Global i.e., Dmc Global and Capital Drilling go up and down completely randomly.

Pair Corralation between Dmc Global and Capital Drilling

Given the investment horizon of 90 days Dmc Global is expected to under-perform the Capital Drilling. But the stock apears to be less risky and, when comparing its historical volatility, Dmc Global is 1.13 times less risky than Capital Drilling. The stock trades about -0.3 of its potential returns per unit of risk. The Capital Drilling is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  8,848  in Capital Drilling on January 25, 2024 and sell it today you would earn a total of  902.00  from holding Capital Drilling or generate 10.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Dmc Global  vs.  Capital Drilling

Dmc Global

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dmc Global has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Dmc Global is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Capital Drilling

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Capital Drilling are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Capital Drilling unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dmc Global and Capital Drilling

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

The idea behind Dmc Global and Capital 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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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.