Correlation Between Basic Energy and Dril Quip

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both Basic Energy and Dril Quip 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 Basic Energy and Dril Quip into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Basic Energy Services and Dril-Quip, you can compare the effects of market volatilities on Basic Energy and Dril Quip 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 Basic Energy with a short position of Dril Quip. Check out your portfolio center. Please also check ongoing floating volatility patterns of Basic Energy and Dril Quip.

Diversification Opportunities for Basic Energy and Dril Quip

-0.51
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Basic and Dril Quip is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Basic Energy Services and Dril-Quip in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dril-Quip and Basic Energy 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 Basic Energy Services are associated (or correlated) with Dril Quip. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dril-Quip has no effect on the direction of Basic Energy i.e., Basic Energy and Dril Quip go up and down completely randomly.

Pair Corralation between Basic Energy and Dril Quip

Assuming the 90 days horizon Basic Energy Services is expected to generate 20.3 times more return on investment than Dril Quip. However, Basic Energy is 20.3 times more volatile than Dril-Quip. It trades about 0.05 of its potential returns per unit of risk. Dril-Quip is currently generating about 0.01 per unit of risk. If you would invest  20.00  in Basic Energy Services on July 6, 2022 and sell it today you would lose (20.00)  from holding Basic Energy Services or give up 100.0% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy95.17%
ValuesDaily Returns

Basic Energy Services  vs.  Dril-Quip

 Performance (%) 
       Timeline  
Basic Energy Services 
Basic Performance
0 of 100
Over the last 90 days Basic Energy Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very conflicting basic indicators, Basic Energy displayed solid returns over the last few months and may actually be approaching a breakup point.
Dril-Quip 
Dril Quip Performance
0 of 100
Over the last 90 days Dril-Quip has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm insiders.

Dril Quip Price Channel

Basic Energy and Dril Quip Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Basic Energy and Dril Quip

The main advantage of trading using opposite Basic Energy and Dril Quip positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Basic Energy position performs unexpectedly, Dril Quip 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 Dril Quip will offset losses from the drop in Dril Quip's long position.
Basic Energy vs. Amazon Inc
The idea behind Basic Energy Services and Dril-Quip 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.
Dril Quip vs. Amazon 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.

Other Complementary Tools

Portfolio Comparator
Compare the composition, asset allocations and performance of any two portfolios in your account
Go
Aroon Oscillator
Analyze current equity momentum using Aroon Oscillator and other momentum ratios
Go
Risk-Return Analysis
View associations between returns expected from investment and the risk you assume
Go
Technical Analysis
Check basic technical indicators and analysis based on most latest market data
Go
Transaction History
View history of all your transactions and understand their impact on performance
Go
Portfolio File Import
Quickly import all of your third-party portfolios from your local drive in csv format
Go
Equity Search
Search for actively traded equities including funds and ETFs from over 30 global markets
Go
Portfolio Volatility
Check portfolio volatility and analyze historical return density to properly model market risk
Go
Equity Analysis
Research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities
Go
Portfolio Holdings
Check your current holdings and cash postion to detemine if your portfolio needs rebalancing
Go
Focused Opportunities
Build portfolios using our predefined set of ideas and optimize them against your investing preferences
Go