Correlation Between Capital Drilling and Hilton Food

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

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

Diversification Opportunities for Capital Drilling and Hilton Food

0.84

Correlation Coefficient

Capital Drilling  Hilton Food

Very poor diversification

The 3 months correlation between Capital and Hilton is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Capital Drilling and Hilton Food Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hilton Food Group and Capital 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 Capital Drilling are associated (or correlated) with Hilton Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hilton Food Group has no effect on the direction of Capital Drilling i.e., Capital Drilling and Hilton Food go up and down completely randomly.

Pair Corralation between Capital Drilling and Hilton Food

Assuming the 90 days trading horizon Capital Drilling is expected to under-perform the Hilton Food. In addition to that, Capital Drilling is 3.2 times more volatile than Hilton Food Group. It trades about -0.11 of its total potential returns per unit of risk. Hilton Food Group is currently generating about -0.1 per unit of volatility. If you would invest  90,400  in Hilton Food Group on December 24, 2024 and sell it today you would lose (6,600) from holding Hilton Food Group or give up 7.3% of portfolio value over 90 days.

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

Capital Drilling  vs.  Hilton Food Group

Capital Drilling

Risk-Adjusted Performance

Very Weak

Over the last 90 days Capital Drilling has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Hilton Food Group

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Capital Drilling and Hilton Food

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

The idea behind Capital Drilling and Hilton Food Group 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.