Correlation Between Delek Drilling and Precision Drilling

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

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

Diversification Opportunities for Delek Drilling and Precision Drilling

0.03

Correlation Coefficient

Delek Drilling  Precision Drilling

Significant diversification

The 3 months correlation between Delek and Precision is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Delek Drilling and Precision Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Precision Drilling 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 Precision Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Precision Drilling has no effect on the direction of Delek Drilling i.e., Delek Drilling and Precision Drilling go up and down completely randomly.

Pair Corralation between Delek Drilling and Precision Drilling

Assuming the 90 days horizon Delek Drilling is expected to generate 1.03 times more return on investment than Precision Drilling. However, Delek Drilling is 1.03 times more volatile than Precision Drilling. It trades about 0.13 of its potential returns per unit of risk. Precision Drilling is currently generating about -0.04 per unit of risk. If you would invest  259.00  in Delek Drilling on September 1, 2024 and sell it today you would earn a total of  52.00  from holding Delek Drilling or generate 20.08% return on investment over 90 days.

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

Delek Drilling   vs.  Precision Drilling

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.

Precision Drilling

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Precision Drilling has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, Precision Drilling is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Delek Drilling and Precision Drilling

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

The idea behind Delek Drilling and Precision 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.