Correlation Between Delek Drilling and SmartStop Self

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

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

Diversification Opportunities for Delek Drilling and SmartStop Self

0.41

Correlation Coefficient

Delek Drilling  SmartStop Self

Very weak diversification

The 3 months correlation between Delek and SmartStop is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Delek Drilling and SmartStop Self Storage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SmartStop Self Storage and Delek 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 Delek Drilling are associated (or correlated) with SmartStop Self. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SmartStop Self Storage has no effect on the direction of Delek Drilling i.e., Delek Drilling and SmartStop Self go up and down completely randomly.

Pair Corralation between Delek Drilling and SmartStop Self

Assuming the 90 days horizon Delek Drilling is expected to generate 12.7 times more return on investment than SmartStop Self. However, Delek Drilling is 12.7 times more volatile than SmartStop Self Storage. It trades about 0.13 of its potential returns per unit of risk. SmartStop Self Storage is currently generating about 0.0 per unit of risk. If you would invest  311.00  in Delek Drilling on September 19, 2024 and sell it today you would earn a total of  17.00  from holding Delek Drilling or generate 5.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Delek Drilling   vs.  SmartStop Self Storage

Delek Drilling

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Delek Drilling are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Delek Drilling reported solid returns over the last few months and may actually be approaching a breakup point.

SmartStop Self Storage

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SmartStop Self Storage has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, SmartStop Self is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Delek Drilling and SmartStop Self

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

The idea behind Delek Drilling and SmartStop Self Storage 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.