Correlation Between Eidesvik Offshore and PRECISION DRILLING

Can any of the company-specific risk be diversified away by investing in both Eidesvik Offshore 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 Eidesvik Offshore and PRECISION DRILLING into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Eidesvik Offshore ASA and PRECISION DRILLING P, you can compare the effects of market volatilities on Eidesvik Offshore 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 Eidesvik Offshore with a short position of PRECISION DRILLING. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eidesvik Offshore and PRECISION DRILLING.

Diversification Opportunities for Eidesvik Offshore and PRECISION DRILLING

-0.1

Correlation Coefficient

Eidesvik Offshore  PRECISION DRILLING

Good diversification

The 3 months correlation between Eidesvik and PRECISION is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Eidesvik Offshore ASA and PRECISION DRILLING P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PRECISION DRILLING and Eidesvik Offshore 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 Eidesvik Offshore ASA 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 Eidesvik Offshore i.e., Eidesvik Offshore and PRECISION DRILLING go up and down completely randomly.

Pair Corralation between Eidesvik Offshore and PRECISION DRILLING

Assuming the 90 days trading horizon Eidesvik Offshore ASA is expected to generate 0.86 times more return on investment than PRECISION DRILLING. However, Eidesvik Offshore ASA is 1.17 times less risky than PRECISION DRILLING. It trades about -0.1 of its potential returns per unit of risk. PRECISION DRILLING P is currently generating about -0.27 per unit of risk. If you would invest  111.00  in Eidesvik Offshore ASA on September 28, 2024 and sell it today you would lose (3.00) from holding Eidesvik Offshore ASA or give up 2.7% of portfolio value over 90 days.

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

Eidesvik Offshore ASA  vs.  PRECISION DRILLING P

Eidesvik Offshore ASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eidesvik Offshore ASA 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 basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

PRECISION DRILLING

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PRECISION DRILLING P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, PRECISION DRILLING is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Eidesvik Offshore and PRECISION DRILLING

The main advantage of trading using opposite Eidesvik Offshore and PRECISION DRILLING positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eidesvik Offshore 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 Eidesvik Offshore ASA and PRECISION DRILLING P 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.