Correlation Between PRECISION DRILLING and EAGLE MATERIALS

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

Diversification Opportunities for PRECISION DRILLING and EAGLE MATERIALS

-0.07

Correlation Coefficient

PRECISION DRILLING  EAGLE MATERIALS

Good diversification

The 3 months correlation between PRECISION and EAGLE is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding PRECISION DRILLING P and EAGLE MATERIALS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EAGLE MATERIALS 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 EAGLE MATERIALS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EAGLE MATERIALS has no effect on the direction of PRECISION DRILLING i.e., PRECISION DRILLING and EAGLE MATERIALS go up and down completely randomly.

Pair Corralation between PRECISION DRILLING and EAGLE MATERIALS

Assuming the 90 days trading horizon PRECISION DRILLING P is expected to under-perform the EAGLE MATERIALS. In addition to that, PRECISION DRILLING is 1.24 times more volatile than EAGLE MATERIALS. It trades about -0.05 of its total potential returns per unit of risk. EAGLE MATERIALS is currently generating about 0.22 per unit of volatility. If you would invest  22,178  in EAGLE MATERIALS on September 3, 2024 and sell it today you would earn a total of  7,022  from holding EAGLE MATERIALS or generate 31.66% return on investment over 90 days.

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

PRECISION DRILLING P  vs.  EAGLE MATERIALS

PRECISION DRILLING

Risk-Adjusted Performance

0 of 100

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 latest fragile performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

EAGLE MATERIALS

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in EAGLE MATERIALS are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady primary indicators, EAGLE MATERIALS exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PRECISION DRILLING and EAGLE MATERIALS

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

The idea behind PRECISION DRILLING P and EAGLE MATERIALS 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.