Correlation Between Weibo Corp and Precision Drilling

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Can any of the company-specific risk be diversified away by investing in both Weibo Corp 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 Weibo Corp and Precision Drilling into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Weibo Corp and Precision Drilling, you can compare the effects of market volatilities on Weibo Corp 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 Weibo Corp with a short position of Precision Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of Weibo Corp and Precision Drilling.

Diversification Opportunities for Weibo Corp and Precision Drilling

-0.32
  Correlation Coefficient

Very good diversification

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

Pair Corralation between Weibo Corp and Precision Drilling

Allowing for the 90-day total investment horizon Weibo Corp is expected to generate 1.77 times more return on investment than Precision Drilling. However, Weibo Corp is 1.77 times more volatile than Precision Drilling. It trades about 0.13 of its potential returns per unit of risk. Precision Drilling is currently generating about -0.04 per unit of risk. If you would invest  729.00  in Weibo Corp on September 6, 2024 and sell it today you would earn a total of  228.00  from holding Weibo Corp or generate 31.28% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Weibo Corp  vs.  Precision Drilling

 Performance 
       Timeline  
Weibo Corp 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Weibo Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, Weibo Corp sustained solid returns over the last few months and may actually be approaching a breakup point.
Precision Drilling 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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 comparatively stable fundamental indicators, Precision Drilling is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Weibo Corp and Precision Drilling Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Weibo Corp and Precision Drilling

The main advantage of trading using opposite Weibo Corp and Precision Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Weibo Corp 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 Weibo Corp 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.

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