Correlation Between Delek Drilling and Transocean

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

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

Diversification Opportunities for Delek Drilling and Transocean

-0.6

Correlation Coefficient

Delek Drilling  Transocean

Excellent diversification

The 3 months correlation between Delek and Transocean is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Delek Drilling and Transocean in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transocean 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 Transocean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transocean has no effect on the direction of Delek Drilling i.e., Delek Drilling and Transocean go up and down completely randomly.

Pair Corralation between Delek Drilling and Transocean

Assuming the 90 days horizon Delek Drilling is expected to generate 0.62 times more return on investment than Transocean. However, Delek Drilling is 1.62 times less risky than Transocean. It trades about 0.07 of its potential returns per unit of risk. Transocean is currently generating about -0.05 per unit of risk. If you would invest  327.00  in Delek Drilling on December 30, 2024 and sell it today you would earn a total of  25.00  from holding Delek Drilling or generate 7.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.38%
Values	Daily Returns

Delek Drilling   vs.  Transocean

Delek Drilling

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Delek Drilling are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Delek Drilling may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Transocean

Risk-Adjusted Performance

Very Weak

Over the last 90 days Transocean has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's forward indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Delek Drilling and Transocean

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

The idea behind Delek Drilling and Transocean 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.

Check out your portfolio center.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.