Correlation Between Umpqua Holdings and Precision Drilling

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

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

Diversification Opportunities for Umpqua Holdings and Precision Drilling

-0.26

Correlation Coefficient

Umpqua Holdings  Precision Drilling

Very good diversification

The 3 months correlation between Umpqua and Precision is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Umpqua Holdings and Precision Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Precision Drilling and Umpqua Holdings 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 Umpqua 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 Umpqua Holdings i.e., Umpqua Holdings and Precision Drilling go up and down completely randomly.

Pair Corralation between Umpqua Holdings and Precision Drilling

Given the investment horizon of 90 days Umpqua Holdings is expected to under-perform the Precision Drilling. But the stock apears to be less risky and, when comparing its historical volatility, Umpqua Holdings is 2.29 times less risky than Precision Drilling. The stock trades about -0.27 of its potential returns per unit of risk. The Precision Drilling is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  7,829  in Precision Drilling on October 23, 2024 and sell it today you would lose (1,292) from holding Precision Drilling or give up 16.5% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	4.24%
Values	Daily Returns

Umpqua Holdings  vs.  Precision Drilling

Umpqua Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Umpqua Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Umpqua Holdings is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Precision Drilling

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Precision Drilling are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak fundamental indicators, Precision Drilling unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Umpqua Holdings and Precision Drilling

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

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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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.