Correlation Between Computer Modelling and Precision Drilling

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

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

Diversification Opportunities for Computer Modelling and Precision Drilling

-0.4

Correlation Coefficient

Computer Modelling  Precision Drilling

Very good diversification

The 3 months correlation between Computer and Precision is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Computer Modelling Group and Precision Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Precision Drilling and Computer Modelling 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 Computer Modelling Group 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 Computer Modelling i.e., Computer Modelling and Precision Drilling go up and down completely randomly.

Pair Corralation between Computer Modelling and Precision Drilling

Assuming the 90 days trading horizon Computer Modelling Group is expected to under-perform the Precision Drilling. But the stock apears to be less risky and, when comparing its historical volatility, Computer Modelling Group is 1.93 times less risky than Precision Drilling. The stock trades about -0.29 of its potential returns per unit of risk. The Precision Drilling is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  8,568  in Precision Drilling on October 10, 2024 and sell it today you would earn a total of  939.00  from holding Precision Drilling or generate 10.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.0%
Values	Daily Returns

Computer Modelling Group  vs.  Precision Drilling

Computer Modelling

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Computer Modelling Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Precision Drilling

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Precision Drilling are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Precision Drilling may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Computer Modelling and Precision Drilling

The main advantage of trading using opposite Computer Modelling and Precision Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Computer Modelling 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 Computer Modelling Group 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.