Correlation Between Corporate Office and PRECISION DRILLING

Can any of the company-specific risk be diversified away by investing in both Corporate Office 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 Corporate Office and PRECISION DRILLING into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Corporate Office Properties and PRECISION DRILLING P, you can compare the effects of market volatilities on Corporate Office 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 Corporate Office with a short position of PRECISION DRILLING. Check out your portfolio center. Please also check ongoing floating volatility patterns of Corporate Office and PRECISION DRILLING.

Diversification Opportunities for Corporate Office and PRECISION DRILLING

0.23

Correlation Coefficient

Corporate Office  PRECISION DRILLING

Modest diversification

The 3 months correlation between Corporate and PRECISION is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Corporate Office Properties and PRECISION DRILLING P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PRECISION DRILLING and Corporate Office 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 Corporate Office Properties 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 Corporate Office i.e., Corporate Office and PRECISION DRILLING go up and down completely randomly.

Pair Corralation between Corporate Office and PRECISION DRILLING

Assuming the 90 days horizon Corporate Office Properties is expected to generate 0.55 times more return on investment than PRECISION DRILLING. However, Corporate Office Properties is 1.83 times less risky than PRECISION DRILLING. It trades about -0.29 of its potential returns per unit of risk. PRECISION DRILLING P is currently generating about -0.24 per unit of risk. If you would invest  3,080  in Corporate Office Properties on October 4, 2024 and sell it today you would lose (140.00) from holding Corporate Office Properties or give up 4.55% of portfolio value over 90 days.

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

Corporate Office Properties  vs.  PRECISION DRILLING P

Corporate Office Pro

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Corporate Office Properties are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Corporate Office is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

PRECISION DRILLING

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PRECISION DRILLING P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, PRECISION DRILLING is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Corporate Office and PRECISION DRILLING

The main advantage of trading using opposite Corporate Office and PRECISION DRILLING positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Corporate Office 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 Corporate Office Properties and PRECISION DRILLING P 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.