Correlation Between Cheniere Energy and Precision Drilling

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

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

Diversification Opportunities for Cheniere Energy and Precision Drilling

0.38

Correlation Coefficient

Cheniere Energy  Precision Drilling

Weak diversification

The 3 months correlation between Cheniere and Precision is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Cheniere Energy Partners and Precision Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Precision Drilling and Cheniere Energy 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 Cheniere Energy Partners 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 Cheniere Energy i.e., Cheniere Energy and Precision Drilling go up and down completely randomly.

Pair Corralation between Cheniere Energy and Precision Drilling

Considering the 90-day investment horizon Cheniere Energy Partners is expected to generate 0.85 times more return on investment than Precision Drilling. However, Cheniere Energy Partners is 1.17 times less risky than Precision Drilling. It trades about 0.22 of its potential returns per unit of risk. Precision Drilling is currently generating about 0.09 per unit of risk. If you would invest  4,795  in Cheniere Energy Partners on October 25, 2024 and sell it today you would earn a total of  1,256  from holding Cheniere Energy Partners or generate 26.19% return on investment over 90 days.

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

Cheniere Energy Partners  vs.  Precision Drilling

Cheniere Energy Partners

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cheniere Energy Partners are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Cheniere Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Precision Drilling

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Precision Drilling are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak fundamental indicators, Precision Drilling unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cheniere Energy and Precision Drilling

The main advantage of trading using opposite Cheniere Energy and Precision Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cheniere Energy 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 Cheniere Energy Partners 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.