Correlation Between Fredonia Mining and Precision Drilling

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

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

Diversification Opportunities for Fredonia Mining and Precision Drilling

0.15

Correlation Coefficient

Fredonia Mining  Precision Drilling

Average diversification

The 3 months correlation between Fredonia and Precision is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Fredonia Mining and Precision Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Precision Drilling and Fredonia Mining 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 Fredonia Mining 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 Fredonia Mining i.e., Fredonia Mining and Precision Drilling go up and down completely randomly.

Pair Corralation between Fredonia Mining and Precision Drilling

Assuming the 90 days trading horizon Fredonia Mining is expected to under-perform the Precision Drilling. In addition to that, Fredonia Mining is 4.14 times more volatile than Precision Drilling. It trades about -0.23 of its total potential returns per unit of risk. Precision Drilling is currently generating about 0.2 per unit of volatility. If you would invest  8,591  in Precision Drilling on October 6, 2024 and sell it today you would earn a total of  618.00  from holding Precision Drilling or generate 7.19% return on investment over 90 days.

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

Fredonia Mining  vs.  Precision Drilling

Fredonia Mining

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Fredonia Mining are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating technical and fundamental indicators, Fredonia Mining showed solid returns over the last few months and may actually be approaching a breakup point.

Precision Drilling

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Precision Drilling are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Precision Drilling is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Fredonia Mining and Precision Drilling

The main advantage of trading using opposite Fredonia Mining and Precision Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fredonia Mining 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 Fredonia Mining 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.