Correlation Between Precision Drilling and HudBay Minerals

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Can any of the company-specific risk be diversified away by investing in both Precision Drilling and HudBay Minerals 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 HudBay Minerals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Precision Drilling and HudBay Minerals, you can compare the effects of market volatilities on Precision Drilling and HudBay Minerals 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 HudBay Minerals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Precision Drilling and HudBay Minerals.

Diversification Opportunities for Precision Drilling and HudBay Minerals

0.4
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Precision and HudBay is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Precision Drilling and HudBay Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HudBay Minerals 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 HudBay Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HudBay Minerals has no effect on the direction of Precision Drilling i.e., Precision Drilling and HudBay Minerals go up and down completely randomly.

Pair Corralation between Precision Drilling and HudBay Minerals

Assuming the 90 days horizon Precision Drilling is expected to under-perform the HudBay Minerals. But the stock apears to be less risky and, when comparing its historical volatility, Precision Drilling is 2.26 times less risky than HudBay Minerals. The stock trades about -0.44 of its potential returns per unit of risk. The HudBay Minerals is currently generating about -0.16 of returns per unit of risk over similar time horizon. If you would invest  1,186  in HudBay Minerals on November 28, 2024 and sell it today you would lose (169.00) from holding HudBay Minerals or give up 14.25% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Precision Drilling  vs.  HudBay Minerals

 Performance 
       Timeline  
Precision Drilling 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Precision Drilling has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in March 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.
HudBay Minerals 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days HudBay Minerals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's primary indicators remain very healthy which may send shares a bit higher in March 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Precision Drilling and HudBay Minerals Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Precision Drilling and HudBay Minerals

The main advantage of trading using opposite Precision Drilling and HudBay Minerals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Precision Drilling position performs unexpectedly, HudBay Minerals 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 HudBay Minerals will offset losses from the drop in HudBay Minerals' long position.
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The idea behind Precision Drilling and HudBay Minerals 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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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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.

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