Correlation Between United Drilling and ILFS Investment

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

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

Diversification Opportunities for United Drilling and ILFS Investment

0.89

Correlation Coefficient

United Drilling  ILFS Investment

Very poor diversification

The 3 months correlation between United and ILFS is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding United Drilling Tools and ILFS Investment Managers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ILFS Investment Managers and United 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 United Drilling Tools are associated (or correlated) with ILFS Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ILFS Investment Managers has no effect on the direction of United Drilling i.e., United Drilling and ILFS Investment go up and down completely randomly.

Pair Corralation between United Drilling and ILFS Investment

Assuming the 90 days trading horizon United Drilling Tools is expected to under-perform the ILFS Investment. In addition to that, United Drilling is 1.18 times more volatile than ILFS Investment Managers. It trades about -0.14 of its total potential returns per unit of risk. ILFS Investment Managers is currently generating about -0.14 per unit of volatility. If you would invest  1,094  in ILFS Investment Managers on December 31, 2024 and sell it today you would lose (204.00) from holding ILFS Investment Managers or give up 18.65% of portfolio value over 90 days.

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

United Drilling Tools  vs.  ILFS Investment Managers

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 May 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

ILFS Investment Managers

Risk-Adjusted Performance

Very Weak

Over the last 90 days ILFS Investment Managers 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 technical and fundamental indicators remain rather sound which may send shares a bit higher in May 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with United Drilling and ILFS Investment

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

The idea behind United Drilling Tools and ILFS Investment Managers 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.