Correlation Between PRECISION DRILLING and Canadian Utilities

Can any of the company-specific risk be diversified away by investing in both PRECISION DRILLING and Canadian Utilities 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 Canadian Utilities 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 Canadian Utilities Limited, you can compare the effects of market volatilities on PRECISION DRILLING and Canadian Utilities 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 Canadian Utilities. Check out your portfolio center. Please also check ongoing floating volatility patterns of PRECISION DRILLING and Canadian Utilities.

Diversification Opportunities for PRECISION DRILLING and Canadian Utilities

0.01

Correlation Coefficient

PRECISION DRILLING  Canadian Utilities

Significant diversification

The 3 months correlation between PRECISION and Canadian is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding PRECISION DRILLING P and Canadian Utilities Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canadian Utilities 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 Canadian Utilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canadian Utilities has no effect on the direction of PRECISION DRILLING i.e., PRECISION DRILLING and Canadian Utilities go up and down completely randomly.

Pair Corralation between PRECISION DRILLING and Canadian Utilities

Assuming the 90 days trading horizon PRECISION DRILLING P is expected to under-perform the Canadian Utilities. In addition to that, PRECISION DRILLING is 2.19 times more volatile than Canadian Utilities Limited. It trades about -0.15 of its total potential returns per unit of risk. Canadian Utilities Limited is currently generating about -0.03 per unit of volatility. If you would invest  2,351  in Canadian Utilities Limited on November 29, 2024 and sell it today you would lose (46.00) from holding Canadian Utilities Limited or give up 1.96% of portfolio value over 90 days.

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

PRECISION DRILLING P  vs.  Canadian Utilities Limited

PRECISION DRILLING

Risk-Adjusted Performance

Very Weak

Over the last 90 days PRECISION DRILLING P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Canadian Utilities

Risk-Adjusted Performance

Very Weak

Over the last 90 days Canadian Utilities Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Canadian Utilities is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with PRECISION DRILLING and Canadian Utilities

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

The idea behind PRECISION DRILLING P and Canadian Utilities Limited 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.