Correlation Between Smart Sand and Drilling Tools
Can any of the company-specific risk be diversified away by investing in both Smart Sand 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 Smart Sand and Drilling Tools into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Smart Sand and Drilling Tools International, you can compare the effects of market volatilities on Smart Sand 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 Smart Sand with a short position of Drilling Tools. Check out your portfolio center. Please also check ongoing floating volatility patterns of Smart Sand and Drilling Tools.
Diversification Opportunities for Smart Sand and Drilling Tools
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Smart and Drilling is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Smart Sand 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 Smart Sand 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 Smart Sand 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 Smart Sand i.e., Smart Sand and Drilling Tools go up and down completely randomly.
Pair Corralation between Smart Sand and Drilling Tools
Considering the 90-day investment horizon Smart Sand is expected to generate 0.75 times more return on investment than Drilling Tools. However, Smart Sand is 1.34 times less risky than Drilling Tools. It trades about 0.07 of its potential returns per unit of risk. Drilling Tools International is currently generating about 0.04 per unit of risk. If you would invest 177.00 in Smart Sand on August 28, 2024 and sell it today you would earn a total of 68.00 from holding Smart Sand or generate 38.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Smart Sand vs. Drilling Tools International
Performance |
| Timeline |
| Smart Sand |
| Drilling Tools Inter |
Smart Sand and Drilling Tools Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Smart Sand and Drilling Tools
The main advantage of trading using opposite Smart Sand and Drilling Tools positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Smart Sand 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.| Smart Sand vs. ProPetro Holding Corp | Smart Sand vs. RPC Inc | Smart Sand vs. MRC Global | Smart Sand vs. Expro Group Holdings |
| Drilling Tools vs. Highway Holdings Limited | Drilling Tools vs. Boston Beer | Drilling Tools vs. IPG Photonics | Drilling Tools vs. GMS Inc |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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