Correlation Between Diamond Offshore and NASDAQ-100 INDEX

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Can any of the company-specific risk be diversified away by investing in both Diamond Offshore and NASDAQ-100 INDEX 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 Diamond Offshore and NASDAQ-100 INDEX into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Diamond Offshore Drilling and NASDAQ-100 INDEX FUND, you can compare the effects of market volatilities on Diamond Offshore and NASDAQ-100 INDEX 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 Diamond Offshore with a short position of NASDAQ-100 INDEX. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diamond Offshore and NASDAQ-100 INDEX.

Diversification Opportunities for Diamond Offshore and NASDAQ-100 INDEX

0.21
  Correlation Coefficient

Modest diversification

The 3 months correlation between Diamond and NASDAQ-100 is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Diamond Offshore Drilling and NASDAQ-100 INDEX FUND in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NASDAQ-100 INDEX FUND and Diamond Offshore 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 Diamond Offshore Drilling are associated (or correlated) with NASDAQ-100 INDEX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NASDAQ-100 INDEX FUND has no effect on the direction of Diamond Offshore i.e., Diamond Offshore and NASDAQ-100 INDEX go up and down completely randomly.

Pair Corralation between Diamond Offshore and NASDAQ-100 INDEX

Allowing for the 90-day total investment horizon Diamond Offshore Drilling is expected to generate 2.22 times more return on investment than NASDAQ-100 INDEX. However, Diamond Offshore is 2.22 times more volatile than NASDAQ-100 INDEX FUND. It trades about 0.32 of its potential returns per unit of risk. NASDAQ-100 INDEX FUND is currently generating about 0.35 per unit of risk. If you would invest  958.00  in Diamond Offshore Drilling on November 2, 2022 and sell it today you would earn a total of  191.00  from holding Diamond Offshore Drilling or generate 19.94% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Diamond Offshore Drilling  vs.  NASDAQ-100 INDEX FUND

 Performance (%) 
       Timeline  
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. Despite quite weak basic indicators, Diamond Offshore disclosed solid returns over the last few months and may actually be approaching a breakup point.

Diamond Price Channel

NASDAQ-100 INDEX FUND 
NASDAQ-100 Performance
7 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in NASDAQ-100 INDEX FUND are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward-looking signals, NASDAQ-100 INDEX may actually be approaching a critical reversion point that can send shares even higher in March 2023.

NASDAQ-100 Price Channel

Diamond Offshore and NASDAQ-100 INDEX Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Diamond Offshore and NASDAQ-100 INDEX

The main advantage of trading using opposite Diamond Offshore and NASDAQ-100 INDEX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Diamond Offshore position performs unexpectedly, NASDAQ-100 INDEX 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 NASDAQ-100 INDEX will offset losses from the drop in NASDAQ-100 INDEX's long position.
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The idea behind Diamond Offshore Drilling and NASDAQ-100 INDEX FUND 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..

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