Correlation Between Precision Drilling and PACCAR
Can any of the company-specific risk be diversified away by investing in both Precision Drilling and PACCAR 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 PACCAR into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Precision Drilling and PACCAR Inc, you can compare the effects of market volatilities on Precision Drilling and PACCAR 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 PACCAR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Precision Drilling and PACCAR.
Diversification Opportunities for Precision Drilling and PACCAR
-0.14 | Correlation Coefficient |
Good diversification
The 3 months correlation between Precision and PACCAR is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Precision Drilling and PACCAR Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PACCAR Inc 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 PACCAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PACCAR Inc has no effect on the direction of Precision Drilling i.e., Precision Drilling and PACCAR go up and down completely randomly.
Pair Corralation between Precision Drilling and PACCAR
Considering the 90-day investment horizon Precision Drilling is expected to under-perform the PACCAR. In addition to that, Precision Drilling is 1.69 times more volatile than PACCAR Inc. It trades about -0.11 of its total potential returns per unit of risk. PACCAR Inc is currently generating about -0.02 per unit of volatility. If you would invest 11,613 in PACCAR Inc on September 12, 2024 and sell it today you would lose (76.00) from holding PACCAR Inc or give up 0.65% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Precision Drilling vs. PACCAR Inc
Performance |
| Timeline |
| Precision Drilling |
| PACCAR Inc |
Precision Drilling and PACCAR Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Precision Drilling and PACCAR
The main advantage of trading using opposite Precision Drilling and PACCAR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Precision Drilling position performs unexpectedly, PACCAR 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 PACCAR will offset losses from the drop in PACCAR's long position.| Precision Drilling vs. Nabors Industries | Precision Drilling vs. Borr Drilling | Precision Drilling vs. Transocean | Precision Drilling vs. Helmerich and Payne |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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