Correlation Between Gap, and Precision Drilling

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

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

Diversification Opportunities for Gap, and Precision Drilling

0.4

Correlation Coefficient

Gap,  Precision Drilling

Very weak diversification

The 3 months correlation between Gap, and Precision is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding The Gap, and Precision Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Precision Drilling and Gap, 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 The Gap, 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 Gap, i.e., Gap, and Precision Drilling go up and down completely randomly.

Pair Corralation between Gap, and Precision Drilling

Considering the 90-day investment horizon The Gap, is expected to generate 1.04 times more return on investment than Precision Drilling. However, Gap, is 1.04 times more volatile than Precision Drilling. It trades about -0.09 of its potential returns per unit of risk. Precision Drilling is currently generating about -0.17 per unit of risk. If you would invest  2,565  in The Gap, on December 2, 2024 and sell it today you would lose (304.00) from holding The Gap, or give up 11.85% of portfolio value over 90 days.

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

The Gap,  vs.  Precision Drilling

Gap,

Risk-Adjusted Performance

Very Weak

Over the last 90 days The Gap, has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unfluctuating performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail 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 weak performance in the last few months, the Stock's fundamental indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Gap, and Precision Drilling

The main advantage of trading using opposite Gap, and Precision Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gap, 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 The Gap, 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.