Correlation Between Delek Drilling and Permian Resources

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

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

Diversification Opportunities for Delek Drilling and Permian Resources

-0.35

Correlation Coefficient

Delek Drilling  Permian Resources

Very good diversification

The 3 months correlation between Delek and Permian is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Delek Drilling and Permian Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Permian Resources 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 Permian Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Permian Resources has no effect on the direction of Delek Drilling i.e., Delek Drilling and Permian Resources go up and down completely randomly.

Pair Corralation between Delek Drilling and Permian Resources

Assuming the 90 days horizon Delek Drilling is expected to generate 0.73 times more return on investment than Permian Resources. However, Delek Drilling is 1.37 times less risky than Permian Resources. It trades about 0.28 of its potential returns per unit of risk. Permian Resources is currently generating about -0.17 per unit of risk. If you would invest  360.00  in Delek Drilling on December 5, 2024 and sell it today you would earn a total of  45.00  from holding Delek Drilling or generate 12.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Delek Drilling   vs.  Permian Resources

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.

Permian Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days Permian Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Delek Drilling and Permian Resources

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

The idea behind Delek Drilling and Permian Resources 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 Transaction History module to view history of all your transactions and understand their impact on performance.