Correlation Between Cracker Barrel and Drilling Tools

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

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

Diversification Opportunities for Cracker Barrel and Drilling Tools

0.01

Correlation Coefficient

Cracker Barrel  Drilling Tools

Significant diversification

The 3 months correlation between Cracker and Drilling is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Cracker Barrel Old 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 Cracker Barrel 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 Cracker Barrel Old 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 Cracker Barrel i.e., Cracker Barrel and Drilling Tools go up and down completely randomly.

Pair Corralation between Cracker Barrel and Drilling Tools

Given the investment horizon of 90 days Cracker Barrel Old is expected to generate 0.74 times more return on investment than Drilling Tools. However, Cracker Barrel Old is 1.34 times less risky than Drilling Tools. It trades about -0.03 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  10,471  in Cracker Barrel Old on October 25, 2024 and sell it today you would lose (4,501) from holding Cracker Barrel Old or give up 42.99% of portfolio value over 90 days.

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

Cracker Barrel Old  vs.  Drilling Tools International

Cracker Barrel Old

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cracker Barrel Old are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain basic indicators, Cracker Barrel disclosed solid returns over the last few months and may actually be approaching a breakup point.

Drilling Tools Inter

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Drilling Tools International are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Drilling Tools may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Cracker Barrel and Drilling Tools

The main advantage of trading using opposite Cracker Barrel and Drilling Tools positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cracker Barrel 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 Cracker Barrel Old 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.