Correlation Between Aldel Financial and Precision Drilling

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

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

Diversification Opportunities for Aldel Financial and Precision Drilling

0.05

Correlation Coefficient

Aldel Financial  Precision Drilling

Significant diversification

The 3 months correlation between Aldel and Precision is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Aldel Financial II and Precision Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Precision Drilling and Aldel Financial 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 Aldel Financial II are associated (or correlated) with Precision Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Precision Drilling has no effect on the direction of Aldel Financial i.e., Aldel Financial and Precision Drilling go up and down completely randomly.

Pair Corralation between Aldel Financial and Precision Drilling

Assuming the 90 days horizon Aldel Financial II is expected to generate 0.06 times more return on investment than Precision Drilling. However, Aldel Financial II is 17.64 times less risky than Precision Drilling. It trades about 0.04 of its potential returns per unit of risk. Precision Drilling is currently generating about -0.38 per unit of risk. If you would invest  1,002  in Aldel Financial II on September 23, 2024 and sell it today you would earn a total of  1.00  from holding Aldel Financial II or generate 0.1% return on investment over 90 days.

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

Aldel Financial II  vs.  Precision Drilling

Aldel Financial II

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Aldel Financial II are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Aldel Financial is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Precision Drilling

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Aldel Financial and Precision Drilling

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

The idea behind Aldel Financial II and Precision 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.