Correlation Between Precision Drilling and Albertsons Companies

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

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

Diversification Opportunities for Precision Drilling and Albertsons Companies

0.07

Correlation Coefficient

Precision Drilling  Albertsons Companies

Significant diversification

The 3 months correlation between Precision and Albertsons is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Precision Drilling and Albertsons Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Albertsons Companies 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 Albertsons Companies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Albertsons Companies has no effect on the direction of Precision Drilling i.e., Precision Drilling and Albertsons Companies go up and down completely randomly.

Pair Corralation between Precision Drilling and Albertsons Companies

Considering the 90-day investment horizon Precision Drilling is expected to generate 3.2 times less return on investment than Albertsons Companies. In addition to that, Precision Drilling is 1.54 times more volatile than Albertsons Companies. It trades about 0.02 of its total potential returns per unit of risk. Albertsons Companies is currently generating about 0.1 per unit of volatility. If you would invest  1,825  in Albertsons Companies on October 11, 2024 and sell it today you would earn a total of  163.00  from holding Albertsons Companies or generate 8.93% return on investment over 90 days.

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

Precision Drilling  vs.  Albertsons Companies

Precision Drilling

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Precision Drilling are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental indicators, Precision Drilling is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Albertsons Companies

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Albertsons Companies are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating fundamental indicators, Albertsons Companies may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Precision Drilling and Albertsons Companies

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

The idea behind Precision Drilling and Albertsons Companies 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.

Check out your portfolio center.

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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.