Correlation Between Enerflex and Drilling Tools

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

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

Diversification Opportunities for Enerflex and Drilling Tools

-0.6

Correlation Coefficient

Enerflex  Drilling Tools

Excellent diversification

The 3 months correlation between Enerflex and Drilling is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Enerflex and Drilling Tools International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Drilling Tools Inter and Enerflex 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 Enerflex are associated (or correlated) with Drilling Tools. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Drilling Tools Inter has no effect on the direction of Enerflex i.e., Enerflex and Drilling Tools go up and down completely randomly.

Pair Corralation between Enerflex and Drilling Tools

Given the investment horizon of 90 days Enerflex is expected to under-perform the Drilling Tools. In addition to that, Enerflex is 1.41 times more volatile than Drilling Tools International. It trades about -0.07 of its total potential returns per unit of risk. Drilling Tools International is currently generating about 0.1 per unit of volatility. If you would invest  477.00  in Drilling Tools International on March 19, 2024 and sell it today you would earn a total of  48.00  from holding Drilling Tools International or generate 10.06% return on investment over 90 days.

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

Enerflex  vs.  Drilling Tools International

Enerflex

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Enerflex has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in July 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Drilling Tools Inter

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Drilling Tools International are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating basic indicators, Drilling Tools demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Enerflex and Drilling Tools

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

The idea behind Enerflex and Drilling Tools International 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.