Correlation Between Delek Drilling and American Battery

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

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

Diversification Opportunities for Delek Drilling and American Battery

-0.12

Correlation Coefficient

Delek Drilling  American Battery

Good diversification

The 3 months correlation between Delek and American is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Delek Drilling and American Battery Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Battery Tec and Delek 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 Delek Drilling are associated (or correlated) with American Battery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Battery Tec has no effect on the direction of Delek Drilling i.e., Delek Drilling and American Battery go up and down completely randomly.

Pair Corralation between Delek Drilling and American Battery

Assuming the 90 days horizon Delek Drilling is expected to generate 1.69 times less return on investment than American Battery. But when comparing it to its historical volatility, Delek Drilling is 7.07 times less risky than American Battery. It trades about 0.24 of its potential returns per unit of risk. American Battery Technology is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  91.00  in American Battery Technology on December 4, 2024 and sell it today you would earn a total of  1.00  from holding American Battery Technology or generate 1.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	93.65%
Values	Daily Returns

Delek Drilling   vs.  American Battery Technology

Delek Drilling

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Delek Drilling are ranked lower than 18 (%) 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.

American Battery Tec

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in American Battery Technology are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, American Battery unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Delek Drilling and American Battery

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

The idea behind Delek Drilling and American Battery Technology 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.