Correlation Between Precision Drilling and LILLY

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

By analyzing existing cross correlation between Precision Drilling and LILLY ELI 7125, you can compare the effects of market volatilities on Precision Drilling and LILLY 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 LILLY. Check out your portfolio center. Please also check ongoing floating volatility patterns of Precision Drilling and LILLY.

Diversification Opportunities for Precision Drilling and LILLY

-0.27

Correlation Coefficient

Precision Drilling  LILLY

Very good diversification

The 3 months correlation between Precision and LILLY is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Precision Drilling and LILLY ELI 7125 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LILLY ELI 7125 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 LILLY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LILLY ELI 7125 has no effect on the direction of Precision Drilling i.e., Precision Drilling and LILLY go up and down completely randomly.

Pair Corralation between Precision Drilling and LILLY

Considering the 90-day investment horizon Precision Drilling is expected to under-perform the LILLY. In addition to that, Precision Drilling is 3.77 times more volatile than LILLY ELI 7125. It trades about -0.09 of its total potential returns per unit of risk. LILLY ELI 7125 is currently generating about 0.02 per unit of volatility. If you would invest  10,239  in LILLY ELI 7125 on September 24, 2024 and sell it today you would earn a total of  43.00  from holding LILLY ELI 7125 or generate 0.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	69.23%
Values	Daily Returns

Precision Drilling  vs.  LILLY ELI 7125

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

LILLY ELI 7125

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in LILLY ELI 7125 are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, LILLY is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Precision Drilling and LILLY

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

The idea behind Precision Drilling and LILLY ELI 7125 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.