Correlation Between Precision Drilling and Labrador Gold

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

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

Diversification Opportunities for Precision Drilling and Labrador Gold

-0.42

Correlation Coefficient

Precision Drilling  Labrador Gold

Very good diversification

The 3 months correlation between Precision and Labrador is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Precision Drilling and Labrador Gold Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Labrador Gold Corp and Precision Drilling 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 Precision Drilling are associated (or correlated) with Labrador Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Labrador Gold Corp has no effect on the direction of Precision Drilling i.e., Precision Drilling and Labrador Gold go up and down completely randomly.

Pair Corralation between Precision Drilling and Labrador Gold

Assuming the 90 days horizon Precision Drilling is expected to generate 0.44 times more return on investment than Labrador Gold. However, Precision Drilling is 2.29 times less risky than Labrador Gold. It trades about 0.0 of its potential returns per unit of risk. Labrador Gold Corp is currently generating about -0.02 per unit of risk. If you would invest  10,998  in Precision Drilling on October 9, 2024 and sell it today you would lose (1,917) from holding Precision Drilling or give up 17.43% of portfolio value over 90 days.

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

Precision Drilling  vs.  Labrador Gold Corp

Precision Drilling

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Precision Drilling are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Precision Drilling may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Labrador Gold Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Labrador Gold Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Labrador Gold is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Precision Drilling and Labrador Gold

The main advantage of trading using opposite Precision Drilling and Labrador Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Precision Drilling position performs unexpectedly, Labrador Gold 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 Labrador Gold will offset losses from the drop in Labrador Gold's long position.

The idea behind Precision Drilling and Labrador Gold Corp 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.