Correlation Between Contango ORE and Delek Drilling

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

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

Diversification Opportunities for Contango ORE and Delek Drilling

-0.81

Correlation Coefficient

Contango ORE  Delek Drilling

Pay attention - limited upside

The 3 months correlation between Contango and Delek is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Contango ORE and Delek Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Delek Drilling and Contango ORE 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 Contango ORE 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 Contango ORE i.e., Contango ORE and Delek Drilling go up and down completely randomly.

Pair Corralation between Contango ORE and Delek Drilling

Given the investment horizon of 90 days Contango ORE is expected to under-perform the Delek Drilling. But the stock apears to be less risky and, when comparing its historical volatility, Contango ORE is 1.33 times less risky than Delek Drilling. The stock trades about -0.02 of its potential returns per unit of risk. The Delek Drilling is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  190.00  in Delek Drilling on October 27, 2024 and sell it today you would earn a total of  170.00  from holding Delek Drilling or generate 89.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	68.62%
Values	Daily Returns

Contango ORE  vs.  Delek Drilling

Contango ORE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Contango ORE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Delek Drilling

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Delek Drilling are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Delek Drilling reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Contango ORE and Delek Drilling

The main advantage of trading using opposite Contango ORE and Delek Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Contango ORE 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 Contango ORE 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.