Correlation Between Precision Drilling and Stampede Drilling

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

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

Diversification Opportunities for Precision Drilling and Stampede Drilling

-0.1

Correlation Coefficient

Precision Drilling  Stampede Drilling

Good diversification

The 3 months correlation between Precision and Stampede is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Precision Drilling and Stampede Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stampede Drilling 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 Stampede Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stampede Drilling has no effect on the direction of Precision Drilling i.e., Precision Drilling and Stampede Drilling go up and down completely randomly.

Pair Corralation between Precision Drilling and Stampede Drilling

Assuming the 90 days horizon Precision Drilling is expected to under-perform the Stampede Drilling. But the stock apears to be less risky and, when comparing its historical volatility, Precision Drilling is 1.51 times less risky than Stampede Drilling. The stock trades about -0.31 of its potential returns per unit of risk. The Stampede Drilling is currently generating about -0.16 of returns per unit of risk over similar time horizon. If you would invest  20.00  in Stampede Drilling on September 21, 2024 and sell it today you would lose (2.00) from holding Stampede Drilling or give up 10.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.65%
Values	Daily Returns

Precision Drilling  vs.  Stampede Drilling

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 very healthy basic indicators, Precision Drilling is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Stampede Drilling

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Precision Drilling and Stampede Drilling

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

The idea behind Precision Drilling and Stampede 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..