Correlation Between BRP and Delek Drilling

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

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

Diversification Opportunities for BRP and Delek Drilling

-0.79

Correlation Coefficient

BRP  Delek Drilling

Pay attention - limited upside

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

Pair Corralation between BRP and Delek Drilling

Given the investment horizon of 90 days BRP Inc is expected to under-perform the Delek Drilling. But the stock apears to be less risky and, when comparing its historical volatility, BRP Inc is 2.68 times less risky than Delek Drilling. The stock trades about -0.02 of its potential returns per unit of risk. The Delek Drilling is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  198.00  in Delek Drilling on September 18, 2024 and sell it today you would earn a total of  130.00  from holding Delek Drilling or generate 65.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	67.94%
Values	Daily Returns

BRP Inc  vs.  Delek Drilling

BRP Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BRP Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

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 weak basic indicators, Delek Drilling reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BRP and Delek Drilling

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

The idea behind BRP Inc and Delek 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 Stocks Directory module to find actively traded stocks across global markets.