Correlation Between PRECISION DRILLING and Western Copper

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

By analyzing existing cross correlation between PRECISION DRILLING P and Western Copper and, you can compare the effects of market volatilities on PRECISION DRILLING and Western Copper 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 Western Copper. Check out your portfolio center. Please also check ongoing floating volatility patterns of PRECISION DRILLING and Western Copper.

Diversification Opportunities for PRECISION DRILLING and Western Copper

0.06

Correlation Coefficient

PRECISION DRILLING  Western Copper

Significant diversification

The 3 months correlation between PRECISION and Western is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding PRECISION DRILLING P and Western Copper and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Copper 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 P are associated (or correlated) with Western Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Copper has no effect on the direction of PRECISION DRILLING i.e., PRECISION DRILLING and Western Copper go up and down completely randomly.

Pair Corralation between PRECISION DRILLING and Western Copper

Assuming the 90 days trading horizon PRECISION DRILLING P is expected to generate 0.77 times more return on investment than Western Copper. However, PRECISION DRILLING P is 1.29 times less risky than Western Copper. It trades about 0.42 of its potential returns per unit of risk. Western Copper and is currently generating about -0.03 per unit of risk. If you would invest  5,400  in PRECISION DRILLING P on October 23, 2024 and sell it today you would earn a total of  900.00  from holding PRECISION DRILLING P or generate 16.67% return on investment over 90 days.

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

PRECISION DRILLING P  vs.  Western Copper and

PRECISION DRILLING

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PRECISION DRILLING P are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain technical and fundamental indicators, PRECISION DRILLING reported solid returns over the last few months and may actually be approaching a breakup point.

Western Copper

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Western Copper and has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic 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 Western Copper

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

The idea behind PRECISION DRILLING P and Western Copper and 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.