Correlation Between PRECISION DRILLING and Perma Fix

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

Diversification Opportunities for PRECISION DRILLING and Perma Fix

0.26

Correlation Coefficient

PRECISION DRILLING  Perma Fix

Modest diversification

The 3 months correlation between PRECISION and Perma is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding PRECISION DRILLING P and Perma Fix Environmental Servic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Perma Fix Environmental 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 Perma Fix. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Perma Fix Environmental has no effect on the direction of PRECISION DRILLING i.e., PRECISION DRILLING and Perma Fix go up and down completely randomly.

Pair Corralation between PRECISION DRILLING and Perma Fix

Assuming the 90 days trading horizon PRECISION DRILLING P is expected to under-perform the Perma Fix. But the stock apears to be less risky and, when comparing its historical volatility, PRECISION DRILLING P is 1.66 times less risky than Perma Fix. The stock trades about -0.01 of its potential returns per unit of risk. The Perma Fix Environmental Services is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  354.00  in Perma Fix Environmental Services on October 4, 2024 and sell it today you would earn a total of  686.00  from holding Perma Fix Environmental Services or generate 193.79% return on investment over 90 days.

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

PRECISION DRILLING P  vs.  Perma Fix Environmental Servic

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 nearly stable technical and fundamental indicators, PRECISION DRILLING is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Perma Fix Environmental

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Perma Fix Environmental Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Perma Fix is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with PRECISION DRILLING and Perma Fix

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

The idea behind PRECISION DRILLING P and Perma Fix Environmental Services 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.