Correlation Between Employers Holdings and Precision Drilling

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

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

Diversification Opportunities for Employers Holdings and Precision Drilling

0.02

Correlation Coefficient

Employers Holdings  Precision Drilling

Significant diversification

The 3 months correlation between Employers and Precision is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Employers Holdings and Precision Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Precision Drilling and Employers Holdings 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 Employers Holdings 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 Employers Holdings i.e., Employers Holdings and Precision Drilling go up and down completely randomly.

Pair Corralation between Employers Holdings and Precision Drilling

Considering the 90-day investment horizon Employers Holdings is expected to generate 0.71 times more return on investment than Precision Drilling. However, Employers Holdings is 1.4 times less risky than Precision Drilling. It trades about 0.1 of its potential returns per unit of risk. Precision Drilling is currently generating about -0.1 per unit of risk. If you would invest  4,696  in Employers Holdings on September 20, 2024 and sell it today you would earn a total of  452.00  from holding Employers Holdings or generate 9.63% return on investment over 90 days.

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

Employers Holdings  vs.  Precision Drilling

Employers Holdings

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Employers Holdings are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward indicators, Employers Holdings may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Precision Drilling

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Precision Drilling has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental 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.

Pair Trading with Employers Holdings and Precision Drilling

The main advantage of trading using opposite Employers Holdings and Precision Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Employers Holdings 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 Employers Holdings 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.