Correlation Between Drilling Tools and Lizhi

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

Diversification Opportunities for Drilling Tools and Lizhi

0.07

Correlation Coefficient

Drilling Tools  Lizhi

Significant diversification

The 3 months correlation between Drilling and Lizhi is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Drilling Tools International and Lizhi Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lizhi Inc 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 Lizhi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lizhi Inc has no effect on the direction of Drilling Tools i.e., Drilling Tools and Lizhi go up and down completely randomly.

Pair Corralation between Drilling Tools and Lizhi

Considering the 90-day investment horizon Drilling Tools International is expected to generate about the same return on investment as Lizhi Inc. But, Drilling Tools International is 1.44 times less risky than Lizhi. It trades about -0.04 of its potential returns per unit of risk. Lizhi Inc is currently generating about -0.03 per unit of risk. If you would invest  840.00  in Lizhi Inc on October 10, 2024 and sell it today you would lose (636.00) from holding Lizhi Inc or give up 75.71% of portfolio value over 90 days.

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

Drilling Tools International  vs.  Lizhi Inc

Drilling Tools Inter

Risk-Adjusted Performance

3 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Drilling Tools International are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain basic indicators, Drilling Tools may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Lizhi Inc

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lizhi Inc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain technical and fundamental indicators, Lizhi reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Drilling Tools and Lizhi

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

The idea behind Drilling Tools International and Lizhi Inc 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..