Correlation Between Precision Drilling and Nomura Holdings

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

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

Diversification Opportunities for Precision Drilling and Nomura Holdings

-0.56

Correlation Coefficient

Precision Drilling  Nomura Holdings

Excellent diversification

The 3 months correlation between Precision and Nomura is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Precision Drilling and Nomura Holdings ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nomura Holdings ADR 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 Nomura Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nomura Holdings ADR has no effect on the direction of Precision Drilling i.e., Precision Drilling and Nomura Holdings go up and down completely randomly.

Pair Corralation between Precision Drilling and Nomura Holdings

Considering the 90-day investment horizon Precision Drilling is expected to under-perform the Nomura Holdings. In addition to that, Precision Drilling is 1.2 times more volatile than Nomura Holdings ADR. It trades about -0.14 of its total potential returns per unit of risk. Nomura Holdings ADR is currently generating about 0.12 per unit of volatility. If you would invest  586.00  in Nomura Holdings ADR on December 26, 2024 and sell it today you would earn a total of  79.00  from holding Nomura Holdings ADR or generate 13.48% return on investment over 90 days.

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

Precision Drilling  vs.  Nomura Holdings ADR

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.

Nomura Holdings ADR

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nomura Holdings ADR are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak primary indicators, Nomura Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Precision Drilling and Nomura Holdings

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

The idea behind Precision Drilling and Nomura Holdings ADR 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.