Correlation Between PRECISION DRILLING and National Bank

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

Diversification Opportunities for PRECISION DRILLING and National Bank

0.55

Correlation Coefficient

PRECISION DRILLING  National Bank

Very weak diversification

The 3 months correlation between PRECISION and National is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding PRECISION DRILLING P and National Bank Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Bank Holdings 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 National Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Bank Holdings has no effect on the direction of PRECISION DRILLING i.e., PRECISION DRILLING and National Bank go up and down completely randomly.

Pair Corralation between PRECISION DRILLING and National Bank

Assuming the 90 days trading horizon PRECISION DRILLING P is expected to generate 1.08 times more return on investment than National Bank. However, PRECISION DRILLING is 1.08 times more volatile than National Bank Holdings. It trades about 0.26 of its potential returns per unit of risk. National Bank Holdings is currently generating about -0.25 per unit of risk. If you would invest  5,550  in PRECISION DRILLING P on October 8, 2024 and sell it today you would earn a total of  550.00  from holding PRECISION DRILLING P or generate 9.91% 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.  National Bank Holdings

PRECISION DRILLING

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PRECISION DRILLING P are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady technical and fundamental indicators, PRECISION DRILLING may actually be approaching a critical reversion point that can send shares even higher in February 2025.

National Bank Holdings

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in National Bank Holdings are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, National Bank reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PRECISION DRILLING and National Bank

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

The idea behind PRECISION DRILLING P and National Bank Holdings 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.