Correlation Between Precision Drilling and EMCOR
Can any of the company-specific risk be diversified away by investing in both Precision Drilling and EMCOR 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 EMCOR into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Precision Drilling and EMCOR Group, you can compare the effects of market volatilities on Precision Drilling and EMCOR 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 EMCOR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Precision Drilling and EMCOR.
Diversification Opportunities for Precision Drilling and EMCOR
-0.37 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Precision and EMCOR is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Precision Drilling and EMCOR Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EMCOR Group 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 EMCOR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EMCOR Group has no effect on the direction of Precision Drilling i.e., Precision Drilling and EMCOR go up and down completely randomly.
Pair Corralation between Precision Drilling and EMCOR
Considering the 90-day investment horizon Precision Drilling is expected to generate 35.57 times less return on investment than EMCOR. In addition to that, Precision Drilling is 1.27 times more volatile than EMCOR Group. It trades about 0.01 of its total potential returns per unit of risk. EMCOR Group is currently generating about 0.26 per unit of volatility. If you would invest 42,685 in EMCOR Group on August 28, 2024 and sell it today you would earn a total of 8,793 from holding EMCOR Group or generate 20.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Precision Drilling vs. EMCOR Group
Performance |
| Timeline |
| Precision Drilling |
| EMCOR Group |
Precision Drilling and EMCOR Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Precision Drilling and EMCOR
The main advantage of trading using opposite Precision Drilling and EMCOR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Precision Drilling position performs unexpectedly, EMCOR 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 EMCOR will offset losses from the drop in EMCOR's long position.| Precision Drilling vs. Helmerich and Payne | Precision Drilling vs. Nabors Industries | Precision Drilling vs. Seadrill Limited | Precision Drilling vs. Patterson UTI 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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