Correlation Between Fernhill Beverage and Diamond Offshore

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

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

Diversification Opportunities for Fernhill Beverage and Diamond Offshore

0.0

Correlation Coefficient

Fernhill Beverage  Diamond Offshore

Pay attention - limited upside

The 3 months correlation between Fernhill and Diamond is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Fernhill Beverage 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 Fernhill Beverage 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 Fernhill Beverage 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 Fernhill Beverage i.e., Fernhill Beverage and Diamond Offshore go up and down completely randomly.

Pair Corralation between Fernhill Beverage and Diamond Offshore

If you would invest  0.01  in Fernhill Beverage on January 30, 2024 and sell it today you would earn a total of  0.00  from holding Fernhill Beverage or generate 0.0% return on investment over 90 days.

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

Fernhill Beverage  vs.  Diamond Offshore Drilling

Fernhill Beverage

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fernhill Beverage has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental drivers, Fernhill Beverage is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Diamond Offshore Drilling

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Diamond Offshore Drilling are ranked lower than 3 (%) 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.

Pair Trading with Fernhill Beverage and Diamond Offshore

The main advantage of trading using opposite Fernhill Beverage and Diamond Offshore positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fernhill Beverage 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 Fernhill Beverage 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.