Correlation Between Precision Drilling and Titanium Transportation

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

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

Diversification Opportunities for Precision Drilling and Titanium Transportation

0.87

Correlation Coefficient

Precision Drilling  Titanium Transportation

Very poor diversification

The 3 months correlation between Precision and Titanium is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Precision Drilling and Titanium Transportation Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Titanium Transportation 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 Titanium Transportation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Titanium Transportation has no effect on the direction of Precision Drilling i.e., Precision Drilling and Titanium Transportation go up and down completely randomly.

Pair Corralation between Precision Drilling and Titanium Transportation

Assuming the 90 days horizon Precision Drilling is expected to generate 0.84 times more return on investment than Titanium Transportation. However, Precision Drilling is 1.19 times less risky than Titanium Transportation. It trades about -0.23 of its potential returns per unit of risk. Titanium Transportation Group is currently generating about -0.34 per unit of risk. If you would invest  8,742  in Precision Drilling on December 12, 2024 and sell it today you would lose (2,349) from holding Precision Drilling or give up 26.87% of portfolio value over 90 days.

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

Precision Drilling  vs.  Titanium Transportation Group

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.

Titanium Transportation

Risk-Adjusted Performance

Very Weak

Over the last 90 days Titanium Transportation Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain 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.

Pair Trading with Precision Drilling and Titanium Transportation

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

The idea behind Precision Drilling and Titanium Transportation Group 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.