Correlation Between Drilling Tools and Delek Drilling

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

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

Diversification Opportunities for Drilling Tools and Delek Drilling

-0.17

Correlation Coefficient

Drilling Tools  Delek Drilling

Good diversification

The 3 months correlation between Drilling and Delek is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Drilling Tools International and Delek Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Delek Drilling and Drilling Tools 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 Drilling Tools International are associated (or correlated) with Delek Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Delek Drilling has no effect on the direction of Drilling Tools i.e., Drilling Tools and Delek Drilling go up and down completely randomly.

Pair Corralation between Drilling Tools and Delek Drilling

Considering the 90-day investment horizon Drilling Tools International is expected to under-perform the Delek Drilling. In addition to that, Drilling Tools is 1.54 times more volatile than Delek Drilling . It trades about -0.15 of its total potential returns per unit of risk. Delek Drilling is currently generating about -0.18 per unit of volatility. If you would invest  260.00  in Delek Drilling on March 18, 2024 and sell it today you would lose (17.00) from holding Delek Drilling or give up 6.54% of portfolio value over 90 days.

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

Drilling Tools International  vs.  Delek Drilling

Drilling Tools Inter

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Drilling Tools International are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite fairly conflicting basic indicators, Drilling Tools demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Delek Drilling

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Delek Drilling has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Delek Drilling is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Drilling Tools and Delek Drilling

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

The idea behind Drilling Tools International and Delek 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.