Correlation Between Drilling Tools and Anglo American

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

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

Diversification Opportunities for Drilling Tools and Anglo American

0.04

Correlation Coefficient

Drilling Tools  Anglo American

Significant diversification

The 3 months correlation between Drilling and Anglo is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Drilling Tools International and Anglo American Platinum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anglo American Platinum and Drilling Tools 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 Drilling Tools International are associated (or correlated) with Anglo American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anglo American Platinum has no effect on the direction of Drilling Tools i.e., Drilling Tools and Anglo American go up and down completely randomly.

Pair Corralation between Drilling Tools and Anglo American

Considering the 90-day investment horizon Drilling Tools International is expected to under-perform the Anglo American. But the stock apears to be less risky and, when comparing its historical volatility, Drilling Tools International is 1.76 times less risky than Anglo American. The stock trades about -0.04 of its potential returns per unit of risk. The Anglo American Platinum is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  7,289  in Anglo American Platinum on October 26, 2024 and sell it today you would lose (3,929) from holding Anglo American Platinum or give up 53.9% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	73.48%
Values	Daily Returns

Drilling Tools International  vs.  Anglo American Platinum

Drilling Tools Inter

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Drilling Tools International are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Drilling Tools is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Anglo American Platinum

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Anglo American Platinum has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Drilling Tools and Anglo American

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

The idea behind Drilling Tools International and Anglo American Platinum 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.