Correlation Between Crombie Real and Drilling Tools

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

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

Diversification Opportunities for Crombie Real and Drilling Tools

-0.51

Correlation Coefficient

Crombie Real  Drilling Tools

Excellent diversification

The 3 months correlation between Crombie and Drilling is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Crombie Real Estate 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 Crombie Real 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 Crombie Real Estate 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 Crombie Real i.e., Crombie Real and Drilling Tools go up and down completely randomly.

Pair Corralation between Crombie Real and Drilling Tools

Assuming the 90 days horizon Crombie Real Estate is expected to generate 0.26 times more return on investment than Drilling Tools. However, Crombie Real Estate is 3.86 times less risky than Drilling Tools. It trades about 0.14 of its potential returns per unit of risk. Drilling Tools International is currently generating about -0.08 per unit of risk. If you would invest  919.00  in Crombie Real Estate on December 29, 2024 and sell it today you would earn a total of  64.00  from holding Crombie Real Estate or generate 6.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	93.44%
Values	Daily Returns

Crombie Real Estate  vs.  Drilling Tools International

Crombie Real Estate

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Crombie Real Estate are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal primary indicators, Crombie Real may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Drilling Tools Inter

Risk-Adjusted Performance

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 conflicting performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Crombie Real and Drilling Tools

The main advantage of trading using opposite Crombie Real and Drilling Tools positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Crombie Real 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 Crombie Real Estate 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.