Correlation Between United Drilling and Aban Offshore
Can any of the company-specific risk be diversified away by investing in both United Drilling and Aban Offshore 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 Drilling and Aban Offshore into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United Drilling Tools and Aban Offshore Limited, you can compare the effects of market volatilities on United Drilling and Aban Offshore 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 Drilling with a short position of Aban Offshore. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Drilling and Aban Offshore.
Diversification Opportunities for United Drilling and Aban Offshore
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between United and Aban is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding United Drilling Tools and Aban Offshore Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aban Offshore Limited and United 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 United Drilling Tools are associated (or correlated) with Aban Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aban Offshore Limited has no effect on the direction of United Drilling i.e., United Drilling and Aban Offshore go up and down completely randomly.
Pair Corralation between United Drilling and Aban Offshore
Assuming the 90 days trading horizon United Drilling Tools is expected to generate 1.2 times more return on investment than Aban Offshore. However, United Drilling is 1.2 times more volatile than Aban Offshore Limited. It trades about 0.08 of its potential returns per unit of risk. Aban Offshore Limited is currently generating about -0.12 per unit of risk. If you would invest 23,608 in United Drilling Tools on October 26, 2024 and sell it today you would earn a total of 1,887 from holding United Drilling Tools or generate 7.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
United Drilling Tools vs. Aban Offshore Limited
Performance |
| Timeline |
| United Drilling Tools |
| Aban Offshore Limited |
United Drilling and Aban Offshore Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Drilling and Aban Offshore
The main advantage of trading using opposite United Drilling and Aban Offshore positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Drilling position performs unexpectedly, Aban Offshore 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 Aban Offshore will offset losses from the drop in Aban Offshore's long position.| United Drilling vs. MIC Electronics Limited | United Drilling vs. Electronics Mart India | United Drilling vs. FCS Software Solutions | United Drilling vs. Elin Electronics Limited |
| Aban Offshore vs. Max Healthcare Institute | Aban Offshore vs. Sri Havisha Hospitality | Aban Offshore vs. Akums Drugs and | Aban Offshore vs. United Drilling Tools |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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