Correlation Between Precision Drilling and Lion One

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

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

Diversification Opportunities for Precision Drilling and Lion One

-0.41

Correlation Coefficient

Precision Drilling  Lion One

Very good diversification

The 3 months correlation between Precision and Lion is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Precision Drilling and Lion One Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lion One Metals 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 Lion One. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lion One Metals has no effect on the direction of Precision Drilling i.e., Precision Drilling and Lion One go up and down completely randomly.

Pair Corralation between Precision Drilling and Lion One

Considering the 90-day investment horizon Precision Drilling is expected to generate 0.73 times more return on investment than Lion One. However, Precision Drilling is 1.36 times less risky than Lion One. It trades about -0.06 of its potential returns per unit of risk. Lion One Metals is currently generating about -0.06 per unit of risk. If you would invest  6,584  in Precision Drilling on September 8, 2024 and sell it today you would lose (686.00) from holding Precision Drilling or give up 10.42% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Precision Drilling  vs.  Lion One Metals

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 latest weak performance, the Stock's fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Lion One Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lion One Metals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's essential indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Precision Drilling and Lion One

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

The idea behind Precision Drilling and Lion One Metals 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.