Correlation Between Precision Drilling and Calfrac Well
Can any of the company-specific risk be diversified away by investing in both Precision Drilling and Calfrac Well 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 Calfrac Well into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Precision Drilling and Calfrac Well Services, you can compare the effects of market volatilities on Precision Drilling and Calfrac Well 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 Calfrac Well. Check out your portfolio center. Please also check ongoing floating volatility patterns of Precision Drilling and Calfrac Well.
Diversification Opportunities for Precision Drilling and Calfrac Well
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Precision and Calfrac is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Precision Drilling and Calfrac Well Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Calfrac Well Services 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 Calfrac Well. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Calfrac Well Services has no effect on the direction of Precision Drilling i.e., Precision Drilling and Calfrac Well go up and down completely randomly.
Pair Corralation between Precision Drilling and Calfrac Well
Assuming the 90 days horizon Precision Drilling is expected to generate 1.07 times more return on investment than Calfrac Well. However, Precision Drilling is 1.07 times more volatile than Calfrac Well Services. It trades about 0.01 of its potential returns per unit of risk. Calfrac Well Services is currently generating about -0.03 per unit of risk. If you would invest 10,140 in Precision Drilling on August 27, 2024 and sell it today you would lose (870.00) from holding Precision Drilling or give up 8.58% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Precision Drilling vs. Calfrac Well Services
Performance |
| Timeline |
| Precision Drilling |
| Calfrac Well Services |
Precision Drilling and Calfrac Well Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Precision Drilling and Calfrac Well
The main advantage of trading using opposite Precision Drilling and Calfrac Well positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Precision Drilling position performs unexpectedly, Calfrac Well 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 Calfrac Well will offset losses from the drop in Calfrac Well's 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 |
| Calfrac Well vs. Trican Well Service | Calfrac Well vs. Ensign Energy Services | Calfrac Well vs. Precision Drilling | Calfrac Well vs. Secure Energy Services |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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