Correlation Between Atlantic American and Drilling Tools

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

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

Diversification Opportunities for Atlantic American and Drilling Tools

0.17

Correlation Coefficient

Atlantic American  Drilling Tools

Average diversification

The 3 months correlation between Atlantic and Drilling is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Atlantic American 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 Atlantic American 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 Atlantic American 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 Atlantic American i.e., Atlantic American and Drilling Tools go up and down completely randomly.

Pair Corralation between Atlantic American and Drilling Tools

Given the investment horizon of 90 days Atlantic American is expected to under-perform the Drilling Tools. But the stock apears to be less risky and, when comparing its historical volatility, Atlantic American is 1.15 times less risky than Drilling Tools. The stock trades about -0.01 of its potential returns per unit of risk. The Drilling Tools International is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  335.00  in Drilling Tools International on September 28, 2024 and sell it today you would lose (40.00) from holding Drilling Tools International or give up 11.94% of portfolio value over 90 days.

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

Atlantic American  vs.  Drilling Tools International

Atlantic American

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Atlantic American has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's primary indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Drilling Tools Inter

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Drilling Tools International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Atlantic American and Drilling Tools

The main advantage of trading using opposite Atlantic American and Drilling Tools positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Atlantic American 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 Atlantic American 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 CEOs Directory module to screen CEOs from public companies around the world.