Correlation Between Delek Drilling and Daiwa Securities

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

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

Diversification Opportunities for Delek Drilling and Daiwa Securities

-0.15

Correlation Coefficient

Delek Drilling  Daiwa Securities

Good diversification

The 3 months correlation between Delek and Daiwa is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Delek Drilling and Daiwa Securities Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daiwa Securities 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 Daiwa Securities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daiwa Securities has no effect on the direction of Delek Drilling i.e., Delek Drilling and Daiwa Securities go up and down completely randomly.

Pair Corralation between Delek Drilling and Daiwa Securities

Assuming the 90 days horizon Delek Drilling is expected to generate 1.46 times more return on investment than Daiwa Securities. However, Delek Drilling is 1.46 times more volatile than Daiwa Securities Group. It trades about 0.18 of its potential returns per unit of risk. Daiwa Securities Group is currently generating about -0.03 per unit of risk. If you would invest  255.00  in Delek Drilling on October 15, 2024 and sell it today you would earn a total of  76.00  from holding Delek Drilling or generate 29.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.83%
Values	Daily Returns

Delek Drilling   vs.  Daiwa Securities Group

Delek Drilling

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Delek Drilling are ranked lower than 14 (%) 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.

Daiwa Securities

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Daiwa Securities Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, Daiwa Securities is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Delek Drilling and Daiwa Securities

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

The idea behind Delek Drilling and Daiwa Securities Group 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.