Correlation Between Deep Value and Dolphin Drilling

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

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

Diversification Opportunities for Deep Value and Dolphin Drilling

0.67

Correlation Coefficient

Deep Value  Dolphin Drilling

Poor diversification

The 3 months correlation between Deep and Dolphin is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Deep Value Driller and Dolphin Drilling AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dolphin Drilling and Deep Value 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 Deep Value Driller are associated (or correlated) with Dolphin Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dolphin Drilling has no effect on the direction of Deep Value i.e., Deep Value and Dolphin Drilling go up and down completely randomly.

Pair Corralation between Deep Value and Dolphin Drilling

Assuming the 90 days trading horizon Deep Value Driller is expected to generate 0.73 times more return on investment than Dolphin Drilling. However, Deep Value Driller is 1.37 times less risky than Dolphin Drilling. It trades about 0.01 of its potential returns per unit of risk. Dolphin Drilling AS is currently generating about -0.07 per unit of risk. If you would invest  1,545  in Deep Value Driller on December 30, 2024 and sell it today you would lose (89.00) from holding Deep Value Driller or give up 5.76% of portfolio value over 90 days.

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

Deep Value Driller  vs.  Dolphin Drilling AS

Deep Value Driller

Risk-Adjusted Performance

Very Weak

Over the last 90 days Deep Value Driller has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental indicators, Deep Value is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Dolphin Drilling

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Deep Value and Dolphin Drilling

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

The idea behind Deep Value Driller and Dolphin Drilling AS 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.