Correlation Between Brunswick and Delek Drilling

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

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

Diversification Opportunities for Brunswick and Delek Drilling

-0.33

Correlation Coefficient

Brunswick  Delek Drilling

Very good diversification

The 3 months correlation between Brunswick and Delek is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Brunswick and Delek Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Delek Drilling and Brunswick 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 Brunswick 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 Brunswick i.e., Brunswick and Delek Drilling go up and down completely randomly.

Pair Corralation between Brunswick and Delek Drilling

Allowing for the 90-day total investment horizon Brunswick is expected to under-perform the Delek Drilling. But the stock apears to be less risky and, when comparing its historical volatility, Brunswick is 1.28 times less risky than Delek Drilling. The stock trades about -0.04 of its potential returns per unit of risk. The Delek Drilling is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  267.00  in Delek Drilling on September 14, 2024 and sell it today you would earn a total of  38.00  from holding Delek Drilling or generate 14.23% return on investment over 90 days.

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

Brunswick  vs.  Delek Drilling

Brunswick

Risk-Adjusted Performance

0 of 100

Very Weak

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

Delek Drilling

Risk-Adjusted Performance

7 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Delek Drilling are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Delek Drilling reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Brunswick and Delek Drilling

The main advantage of trading using opposite Brunswick and Delek Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brunswick 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 Brunswick 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.