Correlation Between Diamond Offshore and Westrock Coffee

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

Diversification Opportunities for Diamond Offshore and Westrock Coffee

0.03

Correlation Coefficient

Diamond Offshore  Westrock Coffee

Significant diversification

The 3 months correlation between Diamond and Westrock is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Diamond Offshore Drilling and Westrock Coffee in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westrock Coffee 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 Westrock Coffee. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Westrock Coffee has no effect on the direction of Diamond Offshore i.e., Diamond Offshore and Westrock Coffee go up and down completely randomly.

Pair Corralation between Diamond Offshore and Westrock Coffee

Allowing for the 90-day total investment horizon Diamond Offshore is expected to generate 250.5 times less return on investment than Westrock Coffee. In addition to that, Diamond Offshore is 1.5 times more volatile than Westrock Coffee. It trades about 0.0 of its total potential returns per unit of risk. Westrock Coffee is currently generating about 0.12 per unit of volatility. If you would invest  975.00  in Westrock Coffee on January 18, 2024 and sell it today you would earn a total of  31.00  from holding Westrock Coffee or generate 3.18% return on investment over 90 days.

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

Diamond Offshore Drilling  vs.  Westrock Coffee

Diamond Offshore Drilling

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Diamond Offshore Drilling are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, Diamond Offshore may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Westrock Coffee

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Westrock Coffee has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Westrock Coffee is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Diamond Offshore and Westrock Coffee

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

The idea behind Diamond Offshore Drilling and Westrock Coffee 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.

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 the USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.