Correlation Between LLOYDS and Precision Drilling

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Can any of the company-specific risk be diversified away by investing in both LLOYDS and Precision Drilling 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 LLOYDS and Precision Drilling into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LLOYDS 3369 14 DEC 46 and Precision Drilling, you can compare the effects of market volatilities on LLOYDS and Precision Drilling 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 LLOYDS with a short position of Precision Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of LLOYDS and Precision Drilling.

Diversification Opportunities for LLOYDS and Precision Drilling

0.08
  Correlation Coefficient

Significant diversification

The 3 months correlation between LLOYDS and Precision is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding LLOYDS 3369 14 DEC 46 and Precision Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Precision Drilling and LLOYDS 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 LLOYDS 3369 14 DEC 46 are associated (or correlated) with Precision Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Precision Drilling has no effect on the direction of LLOYDS i.e., LLOYDS and Precision Drilling go up and down completely randomly.

Pair Corralation between LLOYDS and Precision Drilling

If you would invest  6,134  in Precision Drilling on September 5, 2024 and sell it today you would earn a total of  138.00  from holding Precision Drilling or generate 2.25% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy4.55%
ValuesDaily Returns

LLOYDS 3369 14 DEC 46  vs.  Precision Drilling

 Performance 
       Timeline  
LLOYDS 3369 14 

Risk-Adjusted Performance

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Weak
 
Strong
Weak
Over the last 90 days LLOYDS 3369 14 DEC 46 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, LLOYDS is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Precision Drilling 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Precision Drilling has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, Precision Drilling is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

LLOYDS and Precision Drilling Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with LLOYDS and Precision Drilling

The main advantage of trading using opposite LLOYDS and Precision Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LLOYDS position performs unexpectedly, Precision Drilling 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 Precision Drilling will offset losses from the drop in Precision Drilling's long position.
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The idea behind LLOYDS 3369 14 DEC 46 and Precision Drilling 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.

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