Correlation Between Weyco and Diamond Offshore

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

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

Diversification Opportunities for Weyco and Diamond Offshore

-0.52

Correlation Coefficient

Weyco  Diamond Offshore

Excellent diversification

The 3 months correlation between Weyco and Diamond is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Weyco Group and Diamond Offshore Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diamond Offshore Drilling and Weyco 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 Weyco Group are associated (or correlated) with Diamond Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diamond Offshore Drilling has no effect on the direction of Weyco i.e., Weyco and Diamond Offshore go up and down completely randomly.

Pair Corralation between Weyco and Diamond Offshore

Given the investment horizon of 90 days Weyco Group is expected to under-perform the Diamond Offshore. But the stock apears to be less risky and, when comparing its historical volatility, Weyco Group is 1.08 times less risky than Diamond Offshore. The stock trades about -0.11 of its potential returns per unit of risk. The Diamond Offshore Drilling is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  1,118  in Diamond Offshore Drilling on January 29, 2024 and sell it today you would earn a total of  202.00  from holding Diamond Offshore Drilling or generate 18.07% return on investment over 90 days.

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

Weyco Group  vs.  Diamond Offshore Drilling

Weyco Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Weyco Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Diamond Offshore Drilling

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Diamond Offshore Drilling are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Diamond Offshore is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Weyco and Diamond Offshore

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

The idea behind Weyco Group and Diamond Offshore 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.