Correlation Between Precision Drilling and Hafnia

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

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

Diversification Opportunities for Precision Drilling and Hafnia

0.14

Correlation Coefficient

Precision Drilling  Hafnia

Average diversification

The 3 months correlation between Precision and Hafnia is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Precision Drilling and Hafnia Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hafnia Limited 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 Hafnia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hafnia Limited has no effect on the direction of Precision Drilling i.e., Precision Drilling and Hafnia go up and down completely randomly.

Pair Corralation between Precision Drilling and Hafnia

Considering the 90-day investment horizon Precision Drilling is expected to generate 1.07 times less return on investment than Hafnia. But when comparing it to its historical volatility, Precision Drilling is 1.39 times less risky than Hafnia. It trades about 0.16 of its potential returns per unit of risk. Hafnia Limited is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  526.00  in Hafnia Limited on October 8, 2024 and sell it today you would earn a total of  29.00  from holding Hafnia Limited or generate 5.51% 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.  Hafnia Limited

Precision Drilling

Risk-Adjusted Performance

1 of 100

Very 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.

Hafnia Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hafnia Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Precision Drilling and Hafnia

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

The idea behind Precision Drilling and Hafnia Limited 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.