Correlation Between Juniper Hotels and United Drilling

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

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

Diversification Opportunities for Juniper Hotels and United Drilling

0.71

Correlation Coefficient

Juniper Hotels  United Drilling

Poor diversification

The 3 months correlation between Juniper and United is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Juniper Hotels and United Drilling Tools in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Drilling Tools and Juniper Hotels 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 Juniper Hotels are associated (or correlated) with United Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Drilling Tools has no effect on the direction of Juniper Hotels i.e., Juniper Hotels and United Drilling go up and down completely randomly.

Pair Corralation between Juniper Hotels and United Drilling

Assuming the 90 days trading horizon Juniper Hotels is expected to under-perform the United Drilling. In addition to that, Juniper Hotels is 1.21 times more volatile than United Drilling Tools. It trades about -0.11 of its total potential returns per unit of risk. United Drilling Tools is currently generating about -0.11 per unit of volatility. If you would invest  26,928  in United Drilling Tools on December 26, 2024 and sell it today you would lose (4,966) from holding United Drilling Tools or give up 18.44% of portfolio value over 90 days.

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

Juniper Hotels  vs.  United Drilling Tools

Juniper Hotels

Risk-Adjusted Performance

Very Weak

Over the last 90 days Juniper Hotels has generated negative risk-adjusted returns adding no value to investors with long positions. Even with uncertain performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

United Drilling Tools

Risk-Adjusted Performance

Very Weak

Over the last 90 days United Drilling Tools 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 forward 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 Juniper Hotels and United Drilling

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

The idea behind Juniper Hotels and United Drilling Tools 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..