Correlation Between Worthington Steel and Drilling Tools

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

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

Diversification Opportunities for Worthington Steel and Drilling Tools

0.69

Correlation Coefficient

Worthington Steel  Drilling Tools

Poor diversification

The 3 months correlation between Worthington and Drilling is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Worthington Steel and Drilling Tools International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Drilling Tools Inter and Worthington Steel 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 Worthington Steel are associated (or correlated) with Drilling Tools. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Drilling Tools Inter has no effect on the direction of Worthington Steel i.e., Worthington Steel and Drilling Tools go up and down completely randomly.

Pair Corralation between Worthington Steel and Drilling Tools

Allowing for the 90-day total investment horizon Worthington Steel is expected to under-perform the Drilling Tools. But the stock apears to be less risky and, when comparing its historical volatility, Worthington Steel is 1.27 times less risky than Drilling Tools. The stock trades about -0.11 of its potential returns per unit of risk. The Drilling Tools International is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  317.00  in Drilling Tools International on December 22, 2024 and sell it today you would lose (53.00) from holding Drilling Tools International or give up 16.72% of portfolio value over 90 days.

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

Worthington Steel  vs.  Drilling Tools International

Worthington Steel

Risk-Adjusted Performance

Very Weak

Over the last 90 days Worthington Steel has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Drilling Tools Inter

Risk-Adjusted Performance

Very Weak

Over the last 90 days Drilling Tools International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Worthington Steel and Drilling Tools

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

The idea behind Worthington Steel and Drilling Tools International 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.