Correlation Between Precision Drilling and Nasdaq

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

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

Diversification Opportunities for Precision Drilling and Nasdaq

0.0

Correlation Coefficient

Precision Drilling  Nasdaq

Pay attention - limited upside

The 3 months correlation between Precision and Nasdaq is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Precision Drilling and Nasdaq Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nasdaq Inc 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 Nasdaq. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nasdaq Inc has no effect on the direction of Precision Drilling i.e., Precision Drilling and Nasdaq go up and down completely randomly.

Pair Corralation between Precision Drilling and Nasdaq

Considering the 90-day investment horizon Precision Drilling is expected to under-perform the Nasdaq. In addition to that, Precision Drilling is 2.29 times more volatile than Nasdaq Inc. It trades about -0.01 of its total potential returns per unit of risk. Nasdaq Inc is currently generating about 0.18 per unit of volatility. If you would invest  7,278  in Nasdaq Inc on September 13, 2024 and sell it today you would earn a total of  853.00  from holding Nasdaq Inc or generate 11.72% return on investment over 90 days.

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

Precision Drilling  vs.  Nasdaq Inc

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 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.

Nasdaq Inc

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq Inc are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Nasdaq may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Precision Drilling and Nasdaq

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

The idea behind Precision Drilling and Nasdaq Inc 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.