Correlation Between PRECISION DRILLING and Nucor
Can any of the company-specific risk be diversified away by investing in both PRECISION DRILLING and Nucor 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 Nucor into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PRECISION DRILLING P and Nucor, you can compare the effects of market volatilities on PRECISION DRILLING and Nucor 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 Nucor. Check out your portfolio center. Please also check ongoing floating volatility patterns of PRECISION DRILLING and Nucor.
Diversification Opportunities for PRECISION DRILLING and Nucor
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between PRECISION and Nucor is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding PRECISION DRILLING P and Nucor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nucor 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 P are associated (or correlated) with Nucor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nucor has no effect on the direction of PRECISION DRILLING i.e., PRECISION DRILLING and Nucor go up and down completely randomly.
Pair Corralation between PRECISION DRILLING and Nucor
Assuming the 90 days trading horizon PRECISION DRILLING P is expected to generate 1.17 times more return on investment than Nucor. However, PRECISION DRILLING is 1.17 times more volatile than Nucor. It trades about -0.01 of its potential returns per unit of risk. Nucor is currently generating about -0.02 per unit of risk. If you would invest 6,800 in PRECISION DRILLING P on September 26, 2024 and sell it today you would lose (1,400) from holding PRECISION DRILLING P or give up 20.59% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
PRECISION DRILLING P vs. Nucor
Performance |
| Timeline |
| PRECISION DRILLING |
| Nucor |
PRECISION DRILLING and Nucor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PRECISION DRILLING and Nucor
The main advantage of trading using opposite PRECISION DRILLING and Nucor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PRECISION DRILLING position performs unexpectedly, Nucor 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 Nucor will offset losses from the drop in Nucor's long position.| PRECISION DRILLING vs. Sinopec Oilfield Service | PRECISION DRILLING vs. Helmerich Payne | PRECISION DRILLING vs. Patterson UTI Energy | PRECISION DRILLING vs. Nabors Industries |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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