Correlation Between Delek Drilling and Albertsons Companies

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

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

Diversification Opportunities for Delek Drilling and Albertsons Companies

0.54

Correlation Coefficient

Delek Drilling  Albertsons Companies

Very weak diversification

The 3 months correlation between Delek and Albertsons is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Delek Drilling and Albertsons Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Albertsons Companies 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 Albertsons Companies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Albertsons Companies has no effect on the direction of Delek Drilling i.e., Delek Drilling and Albertsons Companies go up and down completely randomly.

Pair Corralation between Delek Drilling and Albertsons Companies

Assuming the 90 days horizon Delek Drilling is expected to generate 1.17 times less return on investment than Albertsons Companies. In addition to that, Delek Drilling is 1.31 times more volatile than Albertsons Companies. It trades about 0.18 of its total potential returns per unit of risk. Albertsons Companies is currently generating about 0.27 per unit of volatility. If you would invest  1,866  in Albertsons Companies on September 2, 2024 and sell it today you would earn a total of  119.00  from holding Albertsons Companies or generate 6.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

Delek Drilling   vs.  Albertsons Companies

Delek Drilling

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Delek Drilling are ranked lower than 10 (%) 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.

Albertsons Companies

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Albertsons Companies are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong fundamental indicators, Albertsons Companies is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Delek Drilling and Albertsons Companies

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

The idea behind Delek Drilling and Albertsons Companies 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.