Correlation Between Superior Drilling and North American

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

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

Diversification Opportunities for Superior Drilling and North American

-0.3

Correlation Coefficient

Superior Drilling  North American

Very good diversification

The 3 months correlation between Superior and North is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Superior Drilling Products and North American Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on North American Const and Superior 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 Superior Drilling Products are associated (or correlated) with North American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of North American Const has no effect on the direction of Superior Drilling i.e., Superior Drilling and North American go up and down completely randomly.

Pair Corralation between Superior Drilling and North American

If you would invest  1,749  in North American Construction on September 21, 2024 and sell it today you would earn a total of  294.00  from holding North American Construction or generate 16.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Superior Drilling Products  vs.  North American Construction

Superior Drilling

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Superior Drilling Products has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Superior Drilling is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

North American Const

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in North American Construction are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, North American may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Superior Drilling and North American

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

The idea behind Superior Drilling Products and North American Construction 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.