Correlation Between Precision Drilling and Pacific Bay

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

By analyzing existing cross correlation between Precision Drilling and Pacific Bay Minerals, you can compare the effects of market volatilities on Precision Drilling and Pacific Bay 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 Pacific Bay. Check out your portfolio center. Please also check ongoing floating volatility patterns of Precision Drilling and Pacific Bay.

Diversification Opportunities for Precision Drilling and Pacific Bay

0.13

Correlation Coefficient

Precision Drilling  Pacific Bay

Average diversification

The 3 months correlation between Precision and Pacific is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Precision Drilling and Pacific Bay Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacific Bay Minerals 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 Pacific Bay. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacific Bay Minerals has no effect on the direction of Precision Drilling i.e., Precision Drilling and Pacific Bay go up and down completely randomly.

Pair Corralation between Precision Drilling and Pacific Bay

Assuming the 90 days horizon Precision Drilling is expected to generate 0.37 times more return on investment than Pacific Bay. However, Precision Drilling is 2.69 times less risky than Pacific Bay. It trades about -0.19 of its potential returns per unit of risk. Pacific Bay Minerals is currently generating about -0.13 per unit of risk. If you would invest  8,337  in Precision Drilling on December 23, 2024 and sell it today you would lose (1,892) from holding Precision Drilling or give up 22.69% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Precision Drilling  vs.  Pacific Bay Minerals

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 unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pacific Bay Minerals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pacific Bay Minerals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Precision Drilling and Pacific Bay

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

The idea behind Precision Drilling and Pacific Bay Minerals 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.