Correlation Between Contango ORE and Precision Drilling

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

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

Diversification Opportunities for Contango ORE and Precision Drilling

-0.08

Correlation Coefficient

Contango ORE  Precision Drilling

Good diversification

The 3 months correlation between Contango and Precision is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Contango ORE and Precision Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Precision Drilling and Contango ORE 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 Contango ORE 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 Contango ORE i.e., Contango ORE and Precision Drilling go up and down completely randomly.

Pair Corralation between Contango ORE and Precision Drilling

Given the investment horizon of 90 days Contango ORE is expected to under-perform the Precision Drilling. In addition to that, Contango ORE is 1.6 times more volatile than Precision Drilling. It trades about -0.02 of its total potential returns per unit of risk. Precision Drilling is currently generating about 0.0 per unit of volatility. If you would invest  7,122  in Precision Drilling on October 27, 2024 and sell it today you would lose (792.00) from holding Precision Drilling or give up 11.12% of portfolio value over 90 days.

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

Contango ORE  vs.  Precision Drilling

Contango ORE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Contango ORE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing 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 comparatively weak fundamental indicators, Precision Drilling may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Contango ORE and Precision Drilling

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

Check out your portfolio center.

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 Bonds Directory module to find actively traded corporate debentures issued by US companies.