Correlation Between United Drilling and Jindal Drilling

Can any of the company-specific risk be diversified away by investing in both United Drilling and Jindal 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 United Drilling and Jindal Drilling 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 Jindal Drilling And, you can compare the effects of market volatilities on United Drilling and Jindal 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 United Drilling with a short position of Jindal Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Drilling and Jindal Drilling.

Diversification Opportunities for United Drilling and Jindal Drilling

0.51

Correlation Coefficient

United Drilling  Jindal Drilling

Very weak diversification

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

Pair Corralation between United Drilling and Jindal Drilling

Assuming the 90 days trading horizon United Drilling is expected to generate 8.62 times less return on investment than Jindal Drilling. But when comparing it to its historical volatility, United Drilling Tools is 1.15 times less risky than Jindal Drilling. It trades about 0.02 of its potential returns per unit of risk. Jindal Drilling And is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  60,155  in Jindal Drilling And on October 24, 2024 and sell it today you would earn a total of  14,520  from holding Jindal Drilling And or generate 24.14% return on investment over 90 days.

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

United Drilling Tools  vs.  Jindal Drilling And

United Drilling Tools

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in United Drilling Tools are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy forward indicators, United Drilling is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Jindal Drilling And

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Jindal Drilling And are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain forward indicators, Jindal Drilling disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with United Drilling and Jindal Drilling

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

The idea behind United Drilling Tools and Jindal Drilling And 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.