Correlation Between PRECISION DRILLING and Siemens Energy

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

Diversification Opportunities for PRECISION DRILLING and Siemens Energy

0.48

Correlation Coefficient

PRECISION DRILLING  Siemens Energy

Very weak diversification

The 3 months correlation between PRECISION and Siemens is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding PRECISION DRILLING P and Siemens Energy AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Siemens Energy AG 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 Siemens Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Siemens Energy AG has no effect on the direction of PRECISION DRILLING i.e., PRECISION DRILLING and Siemens Energy go up and down completely randomly.

Pair Corralation between PRECISION DRILLING and Siemens Energy

Assuming the 90 days trading horizon PRECISION DRILLING P is expected to generate 0.92 times more return on investment than Siemens Energy. However, PRECISION DRILLING P is 1.09 times less risky than Siemens Energy. It trades about 0.22 of its potential returns per unit of risk. Siemens Energy AG is currently generating about -0.04 per unit of risk. If you would invest  5,700  in PRECISION DRILLING P on October 15, 2024 and sell it today you would earn a total of  500.00  from holding PRECISION DRILLING P or generate 8.77% return on investment over 90 days.

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

PRECISION DRILLING P  vs.  Siemens Energy AG

PRECISION DRILLING

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PRECISION DRILLING P are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, PRECISION DRILLING reported solid returns over the last few months and may actually be approaching a breakup point.

Siemens Energy AG

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Siemens Energy AG are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Siemens Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PRECISION DRILLING and Siemens Energy

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

The idea behind PRECISION DRILLING P and Siemens Energy AG 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.