Correlation Between Precision Drilling and Wabash National
Can any of the company-specific risk be diversified away by investing in both Precision Drilling and Wabash National 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 Wabash National into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Precision Drilling and Wabash National, you can compare the effects of market volatilities on Precision Drilling and Wabash National 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 Wabash National. Check out your portfolio center. Please also check ongoing floating volatility patterns of Precision Drilling and Wabash National.
Diversification Opportunities for Precision Drilling and Wabash National
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Precision and Wabash is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Precision Drilling and Wabash National in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wabash National 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 Wabash National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wabash National has no effect on the direction of Precision Drilling i.e., Precision Drilling and Wabash National go up and down completely randomly.
Pair Corralation between Precision Drilling and Wabash National
Considering the 90-day investment horizon Precision Drilling is expected to generate 4.82 times less return on investment than Wabash National. But when comparing it to its historical volatility, Precision Drilling is 1.06 times less risky than Wabash National. It trades about 0.05 of its potential returns per unit of risk. Wabash National is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 1,777 in Wabash National on September 4, 2024 and sell it today you would earn a total of 186.00 from holding Wabash National or generate 10.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Precision Drilling vs. Wabash National
Performance |
| Timeline |
| Precision Drilling |
| Wabash National |
Precision Drilling and Wabash National Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Precision Drilling and Wabash National
The main advantage of trading using opposite Precision Drilling and Wabash National positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Precision Drilling position performs unexpectedly, Wabash National 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 Wabash National will offset losses from the drop in Wabash National'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 |
| Wabash National vs. Rev Group | Wabash National vs. Gencor Industries | Wabash National vs. Alamo Group | Wabash National vs. Columbus McKinnon |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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