Correlation Between Secure Energy and Precision Drilling

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

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

Diversification Opportunities for Secure Energy and Precision Drilling

0.59

Correlation Coefficient

Secure Energy  Precision Drilling

Very weak diversification

The 3 months correlation between Secure and Precision is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Secure Energy Services and Precision Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Precision Drilling and Secure Energy 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 Secure Energy Services 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 Secure Energy i.e., Secure Energy and Precision Drilling go up and down completely randomly.

Pair Corralation between Secure Energy and Precision Drilling

Assuming the 90 days trading horizon Secure Energy Services is expected to generate 0.67 times more return on investment than Precision Drilling. However, Secure Energy Services is 1.48 times less risky than Precision Drilling. It trades about -0.11 of its potential returns per unit of risk. Precision Drilling is currently generating about -0.16 per unit of risk. If you would invest  1,575  in Secure Energy Services on November 29, 2024 and sell it today you would lose (144.00) from holding Secure Energy Services or give up 9.14% of portfolio value over 90 days.

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

Secure Energy Services  vs.  Precision Drilling

Secure Energy Services

Risk-Adjusted Performance

Very Weak

Over the last 90 days Secure Energy Services 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.

Precision Drilling

Risk-Adjusted Performance

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 unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in March 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Secure Energy and Precision Drilling

The main advantage of trading using opposite Secure Energy and Precision Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Secure Energy 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 Secure Energy Services 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.