Correlation Between Precision Drilling and Energy Transfer

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

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

Diversification Opportunities for Precision Drilling and Energy Transfer

-0.28

Correlation Coefficient

Precision Drilling  Energy Transfer

Very good diversification

The 3 months correlation between Precision and Energy is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Precision Drilling and Energy Transfer LP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energy Transfer LP 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 Energy Transfer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energy Transfer LP has no effect on the direction of Precision Drilling i.e., Precision Drilling and Energy Transfer go up and down completely randomly.

Pair Corralation between Precision Drilling and Energy Transfer

Considering the 90-day investment horizon Precision Drilling is expected to under-perform the Energy Transfer. In addition to that, Precision Drilling is 3.7 times more volatile than Energy Transfer LP. It trades about -0.45 of its total potential returns per unit of risk. Energy Transfer LP is currently generating about 0.08 per unit of volatility. If you would invest  1,144  in Energy Transfer LP on December 4, 2024 and sell it today you would earn a total of  11.00  from holding Energy Transfer LP or generate 0.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Precision Drilling  vs.  Energy Transfer LP

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

Energy Transfer LP

Risk-Adjusted Performance

Very Weak

Over the last 90 days Energy Transfer LP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Energy Transfer is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Precision Drilling and Energy Transfer

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

The idea behind Precision Drilling and Energy Transfer LP 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.