Correlation Between Now and Dril Quip

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

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

Diversification Opportunities for Now and Dril Quip

-0.22

Correlation Coefficient

Now  Dril Quip

Very good diversification

The 3 months correlation between Now and Dril is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Now Inc and Dril Quip in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dril Quip and Now 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 Now Inc 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 Now i.e., Now and Dril Quip go up and down completely randomly.

Pair Corralation between Now and Dril Quip

Given the investment horizon of 90 days Now Inc is expected to generate 0.92 times more return on investment than Dril Quip. However, Now Inc is 1.09 times less risky than Dril Quip. It trades about 0.11 of its potential returns per unit of risk. Dril Quip is currently generating about -0.14 per unit of risk. If you would invest  1,302  in Now Inc on August 30, 2024 and sell it today you would earn a total of  211.00  from holding Now Inc or generate 16.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	11.11%
Values	Daily Returns

Now Inc  vs.  Dril Quip

Now Inc

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Now Inc are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Now showed solid returns over the last few months and may actually be approaching a breakup point.

Dril Quip

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dril Quip has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in December 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Now and Dril Quip

The main advantage of trading using opposite Now and Dril Quip positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Now 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.

The idea behind Now Inc 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.

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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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..