Correlation Between Precision Drilling and Brookfield Business
Can any of the company-specific risk be diversified away by investing in both Precision Drilling and Brookfield Business 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 Precision Drilling and Brookfield Business into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Precision Drilling and Brookfield Business Corp, you can compare the effects of market volatilities on Precision Drilling and Brookfield Business 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 Precision Drilling with a short position of Brookfield Business. Check out your portfolio center. Please also check ongoing floating volatility patterns of Precision Drilling and Brookfield Business.
Diversification Opportunities for Precision Drilling and Brookfield Business
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Precision and Brookfield is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Precision Drilling and Brookfield Business Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brookfield Business Corp and Precision Drilling 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 Precision Drilling are associated (or correlated) with Brookfield Business. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brookfield Business Corp has no effect on the direction of Precision Drilling i.e., Precision Drilling and Brookfield Business go up and down completely randomly.
Pair Corralation between Precision Drilling and Brookfield Business
Assuming the 90 days horizon Precision Drilling is expected to generate 11.99 times less return on investment than Brookfield Business. But when comparing it to its historical volatility, Precision Drilling is 1.07 times less risky than Brookfield Business. It trades about 0.01 of its potential returns per unit of risk. Brookfield Business Corp is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 2,465 in Brookfield Business Corp on September 12, 2024 and sell it today you would earn a total of 1,379 from holding Brookfield Business Corp or generate 55.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Precision Drilling vs. Brookfield Business Corp
Performance |
| Timeline |
| Precision Drilling |
| Brookfield Business Corp |
Precision Drilling and Brookfield Business Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Precision Drilling and Brookfield Business
The main advantage of trading using opposite Precision Drilling and Brookfield Business positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Precision Drilling position performs unexpectedly, Brookfield Business 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 Brookfield Business will offset losses from the drop in Brookfield Business' long position.| Precision Drilling vs. Trican Well Service | Precision Drilling vs. Ensign Energy Services | Precision Drilling vs. Calfrac Well Services | Precision Drilling vs. Birchcliff Energy |
| Brookfield Business vs. Algoma Steel Group | Brookfield Business vs. Precision Drilling | Brookfield Business vs. Stampede Drilling | Brookfield Business vs. Primaris Retail RE |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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