Correlation Between Borr Drilling and Drilling Tools

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

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

Diversification Opportunities for Borr Drilling and Drilling Tools

-0.16

Correlation Coefficient

Borr Drilling  Drilling Tools

Good diversification

The 3 months correlation between Borr and Drilling is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Borr Drilling 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 Borr Drilling 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 Borr Drilling 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 Borr Drilling i.e., Borr Drilling and Drilling Tools go up and down completely randomly.

Pair Corralation between Borr Drilling and Drilling Tools

Given the investment horizon of 90 days Borr Drilling is expected to generate 0.86 times more return on investment than Drilling Tools. However, Borr Drilling is 1.17 times less risky than Drilling Tools. It trades about -0.01 of its potential returns per unit of risk. Drilling Tools International is currently generating about -0.04 per unit of risk. If you would invest  548.00  in Borr Drilling on October 26, 2024 and sell it today you would lose (197.00) from holding Borr Drilling or give up 35.95% of portfolio value over 90 days.

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

Borr Drilling  vs.  Drilling Tools International

Borr Drilling

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Borr Drilling has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in February 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Drilling Tools Inter

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Drilling Tools International are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Drilling Tools is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Borr Drilling and Drilling Tools

The main advantage of trading using opposite Borr Drilling and Drilling Tools positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Borr Drilling 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 Borr Drilling 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.