Correlation Between Stampede Drilling and Trican Well

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

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

Diversification Opportunities for Stampede Drilling and Trican Well

0.54

Correlation Coefficient

Stampede Drilling  Trican Well

Very weak diversification

The 3 months correlation between Stampede and Trican is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Stampede Drilling and Trican Well Service in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trican Well Service 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 Trican Well. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trican Well Service has no effect on the direction of Stampede Drilling i.e., Stampede Drilling and Trican Well go up and down completely randomly.

Pair Corralation between Stampede Drilling and Trican Well

Assuming the 90 days horizon Stampede Drilling is expected to generate 2.06 times more return on investment than Trican Well. However, Stampede Drilling is 2.06 times more volatile than Trican Well Service. It trades about 0.02 of its potential returns per unit of risk. Trican Well Service is currently generating about -0.05 per unit of risk. If you would invest  18.00  in Stampede Drilling on December 3, 2024 and sell it today you would earn a total of  0.00  from holding Stampede Drilling or generate 0.0% return on investment over 90 days.

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

Stampede Drilling  vs.  Trican Well Service

Stampede Drilling

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Stampede Drilling are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Stampede Drilling is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Trican Well Service

Risk-Adjusted Performance

Very Weak

Over the last 90 days Trican Well Service has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Stampede Drilling and Trican Well

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

The idea behind Stampede Drilling and Trican Well Service 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.