Correlation Between Delek Drilling and BRP

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

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

Diversification Opportunities for Delek Drilling and BRP

-0.79

Correlation Coefficient

Delek Drilling  BRP

Pay attention - limited upside

The 3 months correlation between Delek and BRP is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Delek Drilling and BRP Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BRP Inc 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 BRP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BRP Inc has no effect on the direction of Delek Drilling i.e., Delek Drilling and BRP go up and down completely randomly.

Pair Corralation between Delek Drilling and BRP

Assuming the 90 days horizon Delek Drilling is expected to generate 1.21 times more return on investment than BRP. However, Delek Drilling is 1.21 times more volatile than BRP Inc. It trades about 0.14 of its potential returns per unit of risk. BRP Inc is currently generating about -0.12 per unit of risk. If you would invest  267.00  in Delek Drilling on September 18, 2024 and sell it today you would earn a total of  61.00  from holding Delek Drilling or generate 22.85% return on investment over 90 days.

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

Delek Drilling   vs.  BRP Inc

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 weak basic indicators, Delek Drilling reported solid returns over the last few months and may actually be approaching a breakup point.

BRP Inc

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Delek Drilling and BRP

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

The idea behind Delek Drilling and BRP Inc 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.