Correlation Between Delek Drilling and Titan International

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

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

Diversification Opportunities for Delek Drilling and Titan International

0.79

Correlation Coefficient

Delek Drilling  Titan International

Poor diversification

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

Pair Corralation between Delek Drilling and Titan International

Assuming the 90 days horizon Delek Drilling is expected to generate 0.69 times more return on investment than Titan International. However, Delek Drilling is 1.44 times less risky than Titan International. It trades about 0.27 of its potential returns per unit of risk. Titan International is currently generating about -0.09 per unit of risk. If you would invest  360.00  in Delek Drilling on November 29, 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 Together
Strength	Significant
Accuracy	95.65%
Values	Daily Returns

Delek Drilling   vs.  Titan International

Delek Drilling

Risk-Adjusted Performance

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.

Titan International

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Titan International are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile basic indicators, Titan International demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Delek Drilling and Titan International

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

The idea behind Delek Drilling and Titan International 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.