Correlation Between Dolphin Drilling and Borr Drilling

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

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

Diversification Opportunities for Dolphin Drilling and Borr Drilling

0.13

Correlation Coefficient

Dolphin Drilling  Borr Drilling

Average diversification

The 3 months correlation between Dolphin and Borr is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Dolphin Drilling AS and Borr Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Borr Drilling and Dolphin 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 Dolphin Drilling AS are associated (or correlated) with Borr Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Borr Drilling has no effect on the direction of Dolphin Drilling i.e., Dolphin Drilling and Borr Drilling go up and down completely randomly.

Pair Corralation between Dolphin Drilling and Borr Drilling

Assuming the 90 days trading horizon Dolphin Drilling AS is expected to generate 1.1 times more return on investment than Borr Drilling. However, Dolphin Drilling is 1.1 times more volatile than Borr Drilling. It trades about 0.0 of its potential returns per unit of risk. Borr Drilling is currently generating about -0.17 per unit of risk. If you would invest  300.00  in Dolphin Drilling AS on September 23, 2024 and sell it today you would lose (10.00) from holding Dolphin Drilling AS or give up 3.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Dolphin Drilling AS  vs.  Borr Drilling

Dolphin Drilling

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dolphin Drilling AS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Dolphin Drilling is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Borr Drilling

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Borr Drilling has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's essential indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Dolphin Drilling and Borr Drilling

The main advantage of trading using opposite Dolphin Drilling and Borr Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dolphin Drilling position performs unexpectedly, Borr Drilling 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 Borr Drilling will offset losses from the drop in Borr Drilling's long position.

The idea behind Dolphin Drilling AS and Borr Drilling 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.