Correlation Between GMO Internet and Delek Drilling

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

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

Diversification Opportunities for GMO Internet and Delek Drilling

0.21

Correlation Coefficient

GMO Internet  Delek Drilling

Modest diversification

The 3 months correlation between GMO and Delek is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding GMO Internet and Delek Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Delek Drilling and GMO Internet 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 GMO Internet are associated (or correlated) with Delek Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Delek Drilling has no effect on the direction of GMO Internet i.e., GMO Internet and Delek Drilling go up and down completely randomly.

Pair Corralation between GMO Internet and Delek Drilling

Assuming the 90 days horizon GMO Internet is expected to under-perform the Delek Drilling. But the pink sheet apears to be less risky and, when comparing its historical volatility, GMO Internet is 1.15 times less risky than Delek Drilling. The pink sheet trades about -0.16 of its potential returns per unit of risk. The Delek Drilling is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  325.00  in Delek Drilling on October 11, 2024 and sell it today you would earn a total of  2.00  from holding Delek Drilling or generate 0.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

GMO Internet  vs.  Delek Drilling

GMO Internet

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GMO Internet has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, GMO Internet is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Delek Drilling

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Delek Drilling are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Delek Drilling reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GMO Internet and Delek Drilling

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

The idea behind GMO Internet and Delek Drilling 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.