Correlation Between United States and Drilling Tools

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

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

Diversification Opportunities for United States and Drilling Tools

-0.44

Correlation Coefficient

United States  Drilling Tools

Very good diversification

The 3 months correlation between United and Drilling is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding United States 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 United States 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 States 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 United States i.e., United States and Drilling Tools go up and down completely randomly.

Pair Corralation between United States and Drilling Tools

Taking into account the 90-day investment horizon United States Steel is expected to generate 1.0 times more return on investment than Drilling Tools. However, United States Steel is 1.0 times less risky than Drilling Tools. It trades about 0.19 of its potential returns per unit of risk. Drilling Tools International is currently generating about -0.07 per unit of risk. If you would invest  3,010  in United States Steel on December 20, 2024 and sell it today you would earn a total of  1,152  from holding United States Steel or generate 38.27% return on investment over 90 days.

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

United States Steel  vs.  Drilling Tools International

United States Steel

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in United States Steel are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, United States showed solid returns over the last few months and may actually be approaching a breakup point.

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 unfluctuating 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 United States and Drilling Tools

The main advantage of trading using opposite United States and Drilling Tools positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United States 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 United States 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..