Correlation Between Richelieu Hardware and Stampede Drilling

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

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

Diversification Opportunities for Richelieu Hardware and Stampede Drilling

-0.18

Correlation Coefficient

Richelieu Hardware  Stampede Drilling

Good diversification

The 3 months correlation between Richelieu and Stampede is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Richelieu Hardware and Stampede Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stampede Drilling and Richelieu Hardware 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 Richelieu Hardware are associated (or correlated) with Stampede Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stampede Drilling has no effect on the direction of Richelieu Hardware i.e., Richelieu Hardware and Stampede Drilling go up and down completely randomly.

Pair Corralation between Richelieu Hardware and Stampede Drilling

Assuming the 90 days trading horizon Richelieu Hardware is expected to under-perform the Stampede Drilling. But the stock apears to be less risky and, when comparing its historical volatility, Richelieu Hardware is 2.49 times less risky than Stampede Drilling. The stock trades about -0.15 of its potential returns per unit of risk. The Stampede Drilling is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  18.00  in Stampede Drilling on October 6, 2024 and sell it today you would earn a total of  0.00  from holding Stampede Drilling or generate 0.0% return on investment over 90 days.

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

Richelieu Hardware  vs.  Stampede Drilling

Richelieu Hardware

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Richelieu Hardware has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical indicators, Richelieu Hardware is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Stampede Drilling

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Stampede Drilling has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Richelieu Hardware and Stampede Drilling

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

The idea behind Richelieu Hardware and Stampede 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.

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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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.