Correlation Between Stampede Drilling and Doman Building

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

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

Diversification Opportunities for Stampede Drilling and Doman Building

-0.51

Correlation Coefficient

Stampede Drilling  Doman Building

Excellent diversification

The 3 months correlation between Stampede and Doman is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Stampede Drilling and Doman Building Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Doman Building Materials and Stampede Drilling 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 Stampede Drilling are associated (or correlated) with Doman Building. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Doman Building Materials has no effect on the direction of Stampede Drilling i.e., Stampede Drilling and Doman Building go up and down completely randomly.

Pair Corralation between Stampede Drilling and Doman Building

Assuming the 90 days horizon Stampede Drilling is expected to under-perform the Doman Building. In addition to that, Stampede Drilling is 1.85 times more volatile than Doman Building Materials. It trades about 0.0 of its total potential returns per unit of risk. Doman Building Materials is currently generating about 0.17 per unit of volatility. If you would invest  741.00  in Doman Building Materials on September 17, 2024 and sell it today you would earn a total of  165.00  from holding Doman Building Materials or generate 22.27% return on investment over 90 days.

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

Stampede Drilling  vs.  Doman Building Materials

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 fairly stable basic indicators, Stampede Drilling is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Doman Building Materials

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Doman Building Materials are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain primary indicators, Doman Building displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Stampede Drilling and Doman Building

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

The idea behind Stampede Drilling and Doman Building Materials 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.