Correlation Between Drilling Tools and Ranger Energy

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

Diversification Opportunities for Drilling Tools and Ranger Energy

-0.32

Correlation Coefficient

Drilling Tools  Ranger Energy

Very good diversification

The 3 months correlation between Drilling and Ranger is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Drilling Tools International and Ranger Energy Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ranger Energy Services 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 Ranger Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ranger Energy Services has no effect on the direction of Drilling Tools i.e., Drilling Tools and Ranger Energy go up and down completely randomly.

Pair Corralation between Drilling Tools and Ranger Energy

Considering the 90-day investment horizon Drilling Tools is expected to generate 5.03 times less return on investment than Ranger Energy. In addition to that, Drilling Tools is 1.66 times more volatile than Ranger Energy Services. It trades about 0.01 of its total potential returns per unit of risk. Ranger Energy Services is currently generating about 0.07 per unit of volatility. If you would invest  975.00  in Ranger Energy Services on September 23, 2024 and sell it today you would earn a total of  420.00  from holding Ranger Energy Services or generate 43.08% return on investment over 90 days.

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

Drilling Tools International  vs.  Ranger Energy Services

Drilling Tools Inter

Risk-Adjusted Performance

0 of 100

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 January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Ranger Energy Services

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ranger Energy Services are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting technical and fundamental indicators, Ranger Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Drilling Tools and Ranger Energy

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

The idea behind Drilling Tools International and Ranger Energy Services 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.