Correlation Between Lion One and Precision Drilling

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

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

Diversification Opportunities for Lion One and Precision Drilling

-0.33

Correlation Coefficient

Lion One  Precision Drilling

Very good diversification

The 3 months correlation between Lion and Precision is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Lion One Metals and Precision Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Precision Drilling and Lion One 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 Lion One 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 Lion One i.e., Lion One and Precision Drilling go up and down completely randomly.

Pair Corralation between Lion One and Precision Drilling

Assuming the 90 days horizon Lion One Metals is expected to under-perform the Precision Drilling. In addition to that, Lion One is 1.36 times more volatile than Precision Drilling. It trades about -0.06 of its total potential returns per unit of risk. Precision Drilling is currently generating about -0.06 per unit of volatility. If you would invest  6,584  in Precision Drilling on September 8, 2024 and sell it today you would lose (686.00) from holding Precision Drilling or give up 10.42% of portfolio value over 90 days.

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

Lion One Metals  vs.  Precision Drilling

Lion One Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lion One Metals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's essential indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

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 latest weak performance, the Stock's fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Lion One and Precision Drilling

The main advantage of trading using opposite Lion One and Precision Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lion One 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 Lion One 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.