Correlation Between Stampede Drilling and Precision Drilling

Can any of the company-specific risk be diversified away by investing in both Stampede Drilling and Precision Drilling 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 Stampede Drilling and Precision Drilling into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Stampede Drilling and Precision Drilling, you can compare the effects of market volatilities on Stampede Drilling and Precision Drilling 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 Stampede Drilling with a short position of Precision Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stampede Drilling and Precision Drilling.

Diversification Opportunities for Stampede Drilling and Precision Drilling

-0.1

Correlation Coefficient

Stampede Drilling  Precision Drilling

Good diversification

The 3 months correlation between Stampede and Precision is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Stampede Drilling and Precision Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Precision Drilling and Stampede 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 Stampede Drilling are associated (or correlated) with Precision Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Precision Drilling has no effect on the direction of Stampede Drilling i.e., Stampede Drilling and Precision Drilling go up and down completely randomly.

Pair Corralation between Stampede Drilling and Precision Drilling

Assuming the 90 days horizon Stampede Drilling is expected to generate 1.51 times more return on investment than Precision Drilling. However, Stampede Drilling is 1.51 times more volatile than Precision Drilling. It trades about -0.16 of its potential returns per unit of risk. Precision Drilling is currently generating about -0.31 per unit of risk. If you would invest  20.00  in Stampede Drilling on September 21, 2024 and sell it today you would lose (2.00) from holding Stampede Drilling or give up 10.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.65%
Values	Daily Returns

Stampede Drilling  vs.  Precision Drilling

Stampede Drilling

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Stampede Drilling has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Precision Drilling

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Precision Drilling has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Precision Drilling is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Stampede Drilling and Precision Drilling

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

The idea behind Stampede Drilling and Precision Drilling 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 Commodity Directory module to find actively traded commodities issued by global exchanges.