Correlation Between Drilling Tools and Enerflex

Can any of the company-specific risk be diversified away by investing in both Drilling Tools and Enerflex 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 Enerflex 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 Enerflex, you can compare the effects of market volatilities on Drilling Tools and Enerflex 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 Enerflex. Check out your portfolio center. Please also check ongoing floating volatility patterns of Drilling Tools and Enerflex.

Diversification Opportunities for Drilling Tools and Enerflex

0.81

Correlation Coefficient

Drilling Tools  Enerflex

Very poor diversification

The 3 months correlation between Drilling and Enerflex is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Drilling Tools International and Enerflex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enerflex 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 Enerflex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enerflex has no effect on the direction of Drilling Tools i.e., Drilling Tools and Enerflex go up and down completely randomly.

Pair Corralation between Drilling Tools and Enerflex

Considering the 90-day investment horizon Drilling Tools International is expected to generate 1.4 times more return on investment than Enerflex. However, Drilling Tools is 1.4 times more volatile than Enerflex. It trades about -0.08 of its potential returns per unit of risk. Enerflex is currently generating about -0.16 per unit of risk. If you would invest  311.00  in Drilling Tools International on December 30, 2024 and sell it today you would lose (55.00) from holding Drilling Tools International or give up 17.68% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Drilling Tools International  vs.  Enerflex

Drilling Tools Inter

Risk-Adjusted Performance

Very Weak

Over the last 90 days Drilling Tools International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Enerflex

Risk-Adjusted Performance

Very Weak

Over the last 90 days Enerflex has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Drilling Tools and Enerflex

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

The idea behind Drilling Tools International and Enerflex 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.