Correlation Between Sphere Entertainment and Precision Drilling

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

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

Diversification Opportunities for Sphere Entertainment and Precision Drilling

0.15

Correlation Coefficient

Sphere Entertainment  Precision Drilling

Average diversification

The 3 months correlation between Sphere and Precision is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Sphere Entertainment Co and Precision Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Precision Drilling and Sphere Entertainment 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 Sphere Entertainment Co 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 Sphere Entertainment i.e., Sphere Entertainment and Precision Drilling go up and down completely randomly.

Pair Corralation between Sphere Entertainment and Precision Drilling

Given the investment horizon of 90 days Sphere Entertainment Co is expected to generate 1.33 times more return on investment than Precision Drilling. However, Sphere Entertainment is 1.33 times more volatile than Precision Drilling. It trades about 0.04 of its potential returns per unit of risk. Precision Drilling is currently generating about 0.01 per unit of risk. If you would invest  3,137  in Sphere Entertainment Co on September 24, 2024 and sell it today you would earn a total of  733.00  from holding Sphere Entertainment Co or generate 23.37% return on investment over 90 days.

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

Sphere Entertainment Co  vs.  Precision Drilling

Sphere Entertainment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sphere Entertainment Co has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical indicators, Sphere Entertainment is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail 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 conflicting performance in the last few months, the Stock's fundamental indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Sphere Entertainment and Precision Drilling

The main advantage of trading using opposite Sphere Entertainment and Precision Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sphere Entertainment 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 Sphere Entertainment Co 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.