Correlation Between Calfrac Well and Precision Drilling
Can any of the company-specific risk be diversified away by investing in both Calfrac Well 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 Calfrac Well and Precision Drilling into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Calfrac Well Services and Precision Drilling, you can compare the effects of market volatilities on Calfrac Well 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 Calfrac Well with a short position of Precision Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of Calfrac Well and Precision Drilling.
Diversification Opportunities for Calfrac Well and Precision Drilling
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Calfrac and Precision is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Calfrac Well Services and Precision Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Precision Drilling and Calfrac 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 Calfrac Well Services 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 Calfrac Well i.e., Calfrac Well and Precision Drilling go up and down completely randomly.
Pair Corralation between Calfrac Well and Precision Drilling
Assuming the 90 days trading horizon Calfrac Well Services is expected to under-perform the Precision Drilling. But the stock apears to be less risky and, when comparing its historical volatility, Calfrac Well Services is 1.1 times less risky than Precision Drilling. The stock trades about -0.01 of its potential returns per unit of risk. The Precision Drilling is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 7,810 in Precision Drilling on August 27, 2024 and sell it today you would earn a total of 1,460 from holding Precision Drilling or generate 18.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Calfrac Well Services vs. Precision Drilling
Performance |
| Timeline |
| Calfrac Well Services |
| Precision Drilling |
Calfrac Well and Precision Drilling Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Calfrac Well and Precision Drilling
The main advantage of trading using opposite Calfrac Well and Precision Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Calfrac Well 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.| Calfrac Well vs. Trican Well Service | Calfrac Well vs. Ensign Energy Services | Calfrac Well vs. Precision Drilling | Calfrac Well vs. Secure Energy Services |
| Precision Drilling vs. Trican Well Service | Precision Drilling vs. Ensign Energy Services | Precision Drilling vs. Calfrac Well Services | Precision Drilling vs. Birchcliff Energy |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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