Correlation Between Drilling Tools and BAIYU Holdings
Can any of the company-specific risk be diversified away by investing in both Drilling Tools and BAIYU Holdings 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 Drilling Tools and BAIYU Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Drilling Tools International and BAIYU Holdings, you can compare the effects of market volatilities on Drilling Tools and BAIYU Holdings 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 Drilling Tools with a short position of BAIYU Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Drilling Tools and BAIYU Holdings.
Diversification Opportunities for Drilling Tools and BAIYU Holdings
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Drilling and BAIYU is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Drilling Tools International and BAIYU Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BAIYU Holdings and Drilling Tools 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 Drilling Tools International are associated (or correlated) with BAIYU Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BAIYU Holdings has no effect on the direction of Drilling Tools i.e., Drilling Tools and BAIYU Holdings go up and down completely randomly.
Pair Corralation between Drilling Tools and BAIYU Holdings
Considering the 90-day investment horizon Drilling Tools International is expected to generate 0.6 times more return on investment than BAIYU Holdings. However, Drilling Tools International is 1.66 times less risky than BAIYU Holdings. It trades about 0.11 of its potential returns per unit of risk. BAIYU Holdings is currently generating about -0.15 per unit of risk. If you would invest 336.00 in Drilling Tools International on September 2, 2024 and sell it today you would earn a total of 18.00 from holding Drilling Tools International or generate 5.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 71.43% |
| Values | Daily Returns |
Drilling Tools International vs. BAIYU Holdings
Performance |
| Timeline |
| Drilling Tools Inter |
| BAIYU Holdings |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Drilling Tools and BAIYU Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Drilling Tools and BAIYU Holdings
The main advantage of trading using opposite Drilling Tools and BAIYU Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Drilling Tools position performs unexpectedly, BAIYU Holdings 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 BAIYU Holdings will offset losses from the drop in BAIYU Holdings' long position.| Drilling Tools vs. Nike Inc | Drilling Tools vs. Comstock Holding Companies | Drilling Tools vs. Tandy Leather Factory | Drilling Tools vs. Crombie Real Estate |
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Check out your portfolio center.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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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