Correlation Between Forum Energy and Precision Drilling

Can any of the company-specific risk be diversified away by investing in both Forum 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 Forum 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 Forum Energy Metals and Precision Drilling, you can compare the effects of market volatilities on Forum 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 Forum Energy with a short position of Precision Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of Forum Energy and Precision Drilling.

Diversification Opportunities for Forum Energy and Precision Drilling

0.38

Correlation Coefficient

Forum Energy  Precision Drilling

Weak diversification

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

Pair Corralation between Forum Energy and Precision Drilling

Assuming the 90 days horizon Forum Energy Metals is expected to generate 4.7 times more return on investment than Precision Drilling. However, Forum Energy is 4.7 times more volatile than Precision Drilling. It trades about -0.02 of its potential returns per unit of risk. Precision Drilling is currently generating about -0.16 per unit of risk. If you would invest  7.00  in Forum Energy Metals on November 29, 2024 and sell it today you would lose (2.00) from holding Forum Energy Metals or give up 28.57% of portfolio value over 90 days.

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

Forum Energy Metals  vs.  Precision Drilling

Forum Energy Metals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Forum Energy Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Precision Drilling

Risk-Adjusted Performance

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 unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in March 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Forum Energy and Precision Drilling

The main advantage of trading using opposite Forum Energy and Precision Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Forum 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 Forum Energy Metals 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.