Correlation Between KRISPY KREME and BORR DRILLING

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

By analyzing existing cross correlation between KRISPY KREME DL 01 and BORR DRILLING NEW, you can compare the effects of market volatilities on KRISPY KREME and BORR 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 KRISPY KREME with a short position of BORR DRILLING. Check out your portfolio center. Please also check ongoing floating volatility patterns of KRISPY KREME and BORR DRILLING.

Diversification Opportunities for KRISPY KREME and BORR DRILLING

-0.1

Correlation Coefficient

KRISPY KREME  BORR DRILLING

Good diversification

The 3 months correlation between KRISPY and BORR is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding KRISPY KREME DL 01 and BORR DRILLING NEW in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BORR DRILLING NEW and KRISPY KREME 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 KRISPY KREME DL 01 are associated (or correlated) with BORR DRILLING. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BORR DRILLING NEW has no effect on the direction of KRISPY KREME i.e., KRISPY KREME and BORR DRILLING go up and down completely randomly.

Pair Corralation between KRISPY KREME and BORR DRILLING

Assuming the 90 days horizon KRISPY KREME DL 01 is expected to generate 0.67 times more return on investment than BORR DRILLING. However, KRISPY KREME DL 01 is 1.49 times less risky than BORR DRILLING. It trades about -0.1 of its potential returns per unit of risk. BORR DRILLING NEW is currently generating about -0.1 per unit of risk. If you would invest  1,086  in KRISPY KREME DL 01 on September 20, 2024 and sell it today you would lose (171.00) from holding KRISPY KREME DL 01 or give up 15.75% of portfolio value over 90 days.

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

KRISPY KREME DL 01  vs.  BORR DRILLING NEW

KRISPY KREME DL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KRISPY KREME DL 01 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

BORR DRILLING NEW

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BORR DRILLING NEW has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with KRISPY KREME and BORR DRILLING

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

The idea behind KRISPY KREME DL 01 and BORR DRILLING NEW 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 Transaction History module to view history of all your transactions and understand their impact on performance.