Correlation Between Homerun Resources and Precision Drilling

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

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

Diversification Opportunities for Homerun Resources and Precision Drilling

-0.03

Correlation Coefficient

Homerun Resources  Precision Drilling

Good diversification

The 3 months correlation between Homerun and Precision is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Homerun Resources and Precision Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Precision Drilling and Homerun Resources 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 Homerun Resources 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 Homerun Resources i.e., Homerun Resources and Precision Drilling go up and down completely randomly.

Pair Corralation between Homerun Resources and Precision Drilling

Assuming the 90 days horizon Homerun Resources is expected to under-perform the Precision Drilling. In addition to that, Homerun Resources is 2.32 times more volatile than Precision Drilling. It trades about -0.02 of its total potential returns per unit of risk. Precision Drilling is currently generating about 0.12 per unit of volatility. If you would invest  8,177  in Precision Drilling on October 25, 2024 and sell it today you would earn a total of  1,262  from holding Precision Drilling or generate 15.43% return on investment over 90 days.

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

Homerun Resources  vs.  Precision Drilling

Homerun Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Homerun Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal 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

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Precision Drilling are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Precision Drilling displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Homerun Resources and Precision Drilling

The main advantage of trading using opposite Homerun Resources and Precision Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Homerun Resources 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 Homerun Resources 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.