Correlation Between Trican Well and Stampede Drilling

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

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

Diversification Opportunities for Trican Well and Stampede Drilling

0.64

Correlation Coefficient

Trican Well  Stampede Drilling

Poor diversification

The 3 months correlation between Trican and Stampede is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Trican Well Service and Stampede Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stampede Drilling and Trican Well 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 Trican Well Service are associated (or correlated) with Stampede Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stampede Drilling has no effect on the direction of Trican Well i.e., Trican Well and Stampede Drilling go up and down completely randomly.

Pair Corralation between Trican Well and Stampede Drilling

Assuming the 90 days trading horizon Trican Well Service is expected to generate 0.33 times more return on investment than Stampede Drilling. However, Trican Well Service is 3.05 times less risky than Stampede Drilling. It trades about -0.03 of its potential returns per unit of risk. Stampede Drilling is currently generating about -0.02 per unit of risk. If you would invest  483.00  in Trican Well Service on December 27, 2024 and sell it today you would lose (23.00) from holding Trican Well Service or give up 4.76% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

Trican Well Service  vs.  Stampede Drilling

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 very healthy basic indicators, Trican Well is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Stampede Drilling

Risk-Adjusted Performance

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.

Pair Trading with Trican Well and Stampede Drilling

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

The idea behind Trican Well Service and Stampede 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.