Correlation Between AMCON Distributing and Diamond Offshore

Can any of the company-specific risk be diversified away by investing in both AMCON Distributing 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 AMCON Distributing and Diamond Offshore into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for AMCON Distributing and Diamond Offshore

-0.61

Correlation Coefficient

AMCON Distributing  Diamond Offshore

Excellent diversification

The 1 month correlation between AMCON and Diamond is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding AMCON Distributing 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 AMCON Distributing 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 AMCON Distributing 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 AMCON Distributing i.e., AMCON Distributing and Diamond Offshore go up and down completely randomly.

Pair Corralation between AMCON Distributing and Diamond Offshore

Considering the 90-day investment horizon AMCON Distributing is expected to under-perform the Diamond Offshore. In addition to that, AMCON Distributing is 1.37 times more volatile than Diamond Offshore Drilling. It trades about -0.07 of its total potential returns per unit of risk. Diamond Offshore Drilling is currently generating about -0.05 per unit of volatility. If you would invest  1,317  in Diamond Offshore Drilling on January 20, 2024 and sell it today you would lose (31.00) from holding Diamond Offshore Drilling or give up 2.35% of portfolio value over 90 days.

Time Period	1 Month [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

AMCON Distributing  vs.  Diamond Offshore Drilling

AMCON Distributing

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AMCON Distributing has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's forward indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Diamond Offshore Drilling

Risk-Adjusted Performance

0 of 100

Weak

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

Pair Trading with AMCON Distributing and Diamond Offshore

The main advantage of trading using opposite AMCON Distributing and Diamond Offshore positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AMCON Distributing 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.

The idea behind AMCON Distributing 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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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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.