Correlation Between Borr Drilling and PrairieSky Royalty

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

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

Diversification Opportunities for Borr Drilling and PrairieSky Royalty

-0.45

Correlation Coefficient

Borr Drilling  PrairieSky Royalty

Very good diversification

The 3 months correlation between Borr and PrairieSky is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Borr Drilling and PrairieSky Royalty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PrairieSky Royalty and Borr 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 Borr Drilling are associated (or correlated) with PrairieSky Royalty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PrairieSky Royalty has no effect on the direction of Borr Drilling i.e., Borr Drilling and PrairieSky Royalty go up and down completely randomly.

Pair Corralation between Borr Drilling and PrairieSky Royalty

Given the investment horizon of 90 days Borr Drilling is expected to under-perform the PrairieSky Royalty. In addition to that, Borr Drilling is 1.98 times more volatile than PrairieSky Royalty. It trades about -0.2 of its total potential returns per unit of risk. PrairieSky Royalty is currently generating about 0.08 per unit of volatility. If you would invest  1,975  in PrairieSky Royalty on September 4, 2024 and sell it today you would earn a total of  146.00  from holding PrairieSky Royalty or generate 7.39% return on investment over 90 days.

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

Borr Drilling  vs.  PrairieSky Royalty

Borr Drilling

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Borr Drilling has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

PrairieSky Royalty

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PrairieSky Royalty are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting forward-looking signals, PrairieSky Royalty may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Borr Drilling and PrairieSky Royalty

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

The idea behind Borr Drilling and PrairieSky Royalty 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.