Correlation Between Capital Drilling and BH Macro

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

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

Diversification Opportunities for Capital Drilling and BH Macro

-0.47

Correlation Coefficient

Capital Drilling  BH Macro

Very good diversification

The 3 months correlation between Capital and BHMU is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Capital Drilling and BH Macro Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BH Macro Limited and Capital 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 Capital Drilling are associated (or correlated) with BH Macro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BH Macro Limited has no effect on the direction of Capital Drilling i.e., Capital Drilling and BH Macro go up and down completely randomly.

Pair Corralation between Capital Drilling and BH Macro

Assuming the 90 days trading horizon Capital Drilling is expected to generate 3.35 times more return on investment than BH Macro. However, Capital Drilling is 3.35 times more volatile than BH Macro Limited. It trades about 0.22 of its potential returns per unit of risk. BH Macro Limited is currently generating about -0.04 per unit of risk. If you would invest  6,940  in Capital Drilling on April 20, 2025 and sell it today you would earn a total of  2,360  from holding Capital Drilling or generate 34.01% return on investment over 90 days.

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

Capital Drilling  vs.  BH Macro Limited

Capital Drilling

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Capital Drilling are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Capital Drilling unveiled solid returns over the last few months and may actually be approaching a breakup point.

BH Macro Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days BH Macro Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, BH Macro is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Capital Drilling and BH Macro

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

The idea behind Capital Drilling and BH Macro Limited 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 Stocks Directory module to find actively traded stocks across global markets.