Correlation Between Spectrum Brands and Precision Drilling

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

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

Diversification Opportunities for Spectrum Brands and Precision Drilling

0.32

Correlation Coefficient

Spectrum Brands  Precision Drilling

Weak diversification

The 3 months correlation between Spectrum and Precision is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Spectrum Brands Holdings and Precision Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Precision Drilling and Spectrum Brands 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 Spectrum Brands Holdings 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 Spectrum Brands i.e., Spectrum Brands and Precision Drilling go up and down completely randomly.

Pair Corralation between Spectrum Brands and Precision Drilling

Considering the 90-day investment horizon Spectrum Brands Holdings is expected to generate 0.7 times more return on investment than Precision Drilling. However, Spectrum Brands Holdings is 1.43 times less risky than Precision Drilling. It trades about 0.05 of its potential returns per unit of risk. Precision Drilling is currently generating about 0.03 per unit of risk. If you would invest  6,022  in Spectrum Brands Holdings on October 10, 2024 and sell it today you would earn a total of  2,370  from holding Spectrum Brands Holdings or generate 39.36% return on investment over 90 days.

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

Spectrum Brands Holdings  vs.  Precision Drilling

Spectrum Brands Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Spectrum Brands Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Spectrum Brands is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Precision Drilling

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Precision Drilling are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak fundamental indicators, Precision Drilling may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Spectrum Brands and Precision Drilling

The main advantage of trading using opposite Spectrum Brands and Precision Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Spectrum Brands 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 Spectrum Brands Holdings 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.

Check out your portfolio center.

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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.