Correlation Between Precision Drilling and Consol Energy

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

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

Diversification Opportunities for Precision Drilling and Consol Energy

0.15

Correlation Coefficient

Precision Drilling  Consol Energy

Average diversification

The 3 months correlation between Precision and Consol is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Precision Drilling and Consol Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Consol Energy 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 Consol Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Consol Energy has no effect on the direction of Precision Drilling i.e., Precision Drilling and Consol Energy go up and down completely randomly.

Pair Corralation between Precision Drilling and Consol Energy

Considering the 90-day investment horizon Precision Drilling is expected to generate 0.97 times more return on investment than Consol Energy. However, Precision Drilling is 1.03 times less risky than Consol Energy. It trades about -0.26 of its potential returns per unit of risk. Consol Energy is currently generating about -0.32 per unit of risk. If you would invest  6,514  in Precision Drilling on September 21, 2024 and sell it today you would lose (769.00) from holding Precision Drilling or give up 11.81% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Precision Drilling  vs.  Consol Energy

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 weak performance in the last few months, the Stock's fundamental indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Consol Energy

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Consol Energy are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak forward indicators, Consol Energy showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Precision Drilling and Consol Energy

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

The idea behind Precision Drilling and Consol Energy 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.