Correlation Between Precision Drilling and Falcon Energy
Can any of the company-specific risk be diversified away by investing in both Precision Drilling and Falcon Energy 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 Falcon Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Precision Drilling and Falcon Energy Materials, you can compare the effects of market volatilities on Precision Drilling and Falcon Energy 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 Falcon Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Precision Drilling and Falcon Energy.
Diversification Opportunities for Precision Drilling and Falcon Energy
-0.08 | Correlation Coefficient |
Good diversification
The 3 months correlation between Precision and Falcon is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Precision Drilling and Falcon Energy Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Falcon Energy Materials 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 Falcon Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Falcon Energy Materials has no effect on the direction of Precision Drilling i.e., Precision Drilling and Falcon Energy go up and down completely randomly.
Pair Corralation between Precision Drilling and Falcon Energy
Assuming the 90 days horizon Precision Drilling is expected to under-perform the Falcon Energy. But the stock apears to be less risky and, when comparing its historical volatility, Precision Drilling is 3.22 times less risky than Falcon Energy. The stock trades about -0.18 of its potential returns per unit of risk. The Falcon Energy Materials is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 62.00 in Falcon Energy Materials on November 4, 2024 and sell it today you would earn a total of 0.00 from holding Falcon Energy Materials or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Precision Drilling vs. Falcon Energy Materials
Performance |
| Timeline |
| Precision Drilling |
| Falcon Energy Materials |
Precision Drilling and Falcon Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Precision Drilling and Falcon Energy
The main advantage of trading using opposite Precision Drilling and Falcon Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Precision Drilling position performs unexpectedly, Falcon Energy 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 Falcon Energy will offset losses from the drop in Falcon Energy'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 |
| Falcon Energy vs. Teck Resources Limited | Falcon Energy vs. Ivanhoe Mines | Falcon Energy vs. NGEx Minerals | Falcon Energy vs. Calibre Mining Corp |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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