Correlation Between Calliditas Therapeutics and Drilling Tools

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

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

Diversification Opportunities for Calliditas Therapeutics and Drilling Tools

0.3

Correlation Coefficient

Calliditas Therapeutics  Drilling Tools

Weak diversification

The 3 months correlation between Calliditas and Drilling is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Calliditas Therapeutics and Drilling Tools International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Drilling Tools Inter and Calliditas Therapeutics 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 Calliditas Therapeutics are associated (or correlated) with Drilling Tools. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Drilling Tools Inter has no effect on the direction of Calliditas Therapeutics i.e., Calliditas Therapeutics and Drilling Tools go up and down completely randomly.

Pair Corralation between Calliditas Therapeutics and Drilling Tools

Given the investment horizon of 90 days Calliditas Therapeutics is expected to generate 6.64 times more return on investment than Drilling Tools. However, Calliditas Therapeutics is 6.64 times more volatile than Drilling Tools International. It trades about 0.26 of its potential returns per unit of risk. Drilling Tools International is currently generating about 0.27 per unit of risk. If you would invest  2,013  in Calliditas Therapeutics on March 7, 2024 and sell it today you would earn a total of  1,968  from holding Calliditas Therapeutics or generate 97.79% return on investment over 90 days.

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

Calliditas Therapeutics  vs.  Drilling Tools International

Calliditas Therapeutics

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Calliditas Therapeutics are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal essential indicators, Calliditas Therapeutics unveiled solid returns over the last few months and may actually be approaching a breakup point.

Drilling Tools Inter

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Drilling Tools International are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain basic indicators, Drilling Tools demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Calliditas Therapeutics and Drilling Tools

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

The idea behind Calliditas Therapeutics and Drilling Tools International 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.