Correlation Between Vantage Drilling and Spectrum Brands

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

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

Diversification Opportunities for Vantage Drilling and Spectrum Brands

0.24

Correlation Coefficient

Vantage Drilling  Spectrum Brands

Modest diversification

The 3 months correlation between Vantage and Spectrum is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Vantage Drilling International and Spectrum Brands Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spectrum Brands Holdings and Vantage 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 Vantage Drilling International are associated (or correlated) with Spectrum Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spectrum Brands Holdings has no effect on the direction of Vantage Drilling i.e., Vantage Drilling and Spectrum Brands go up and down completely randomly.

Pair Corralation between Vantage Drilling and Spectrum Brands

Assuming the 90 days horizon Vantage Drilling International is expected to generate 0.27 times more return on investment than Spectrum Brands. However, Vantage Drilling International is 3.77 times less risky than Spectrum Brands. It trades about -0.13 of its potential returns per unit of risk. Spectrum Brands Holdings is currently generating about -0.06 per unit of risk. If you would invest  2,625  in Vantage Drilling International on October 10, 2024 and sell it today you would lose (75.00) from holding Vantage Drilling International or give up 2.86% of portfolio value over 90 days.

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

Vantage Drilling International  vs.  Spectrum Brands Holdings

Vantage Drilling Int

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vantage Drilling International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Vantage Drilling is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Spectrum Brands Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Spectrum Brands Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Spectrum Brands is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Vantage Drilling and Spectrum Brands

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

The idea behind Vantage Drilling International and Spectrum Brands Holdings 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.