Correlation Between Borr Drilling and Prairie Provident

Can any of the company-specific risk be diversified away by investing in both Borr Drilling and Prairie Provident 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 Borr Drilling and Prairie Provident into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Borr Drilling and Prairie Provident Resources, you can compare the effects of market volatilities on Borr Drilling and Prairie Provident 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 Borr Drilling with a short position of Prairie Provident. Check out your portfolio center. Please also check ongoing floating volatility patterns of Borr Drilling and Prairie Provident.

Diversification Opportunities for Borr Drilling and Prairie Provident

0.74

Correlation Coefficient

Borr Drilling  Prairie Provident

Poor diversification

The 3 months correlation between Borr and Prairie is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Borr Drilling and Prairie Provident Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prairie Provident and Borr 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 Borr Drilling are associated (or correlated) with Prairie Provident. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prairie Provident has no effect on the direction of Borr Drilling i.e., Borr Drilling and Prairie Provident go up and down completely randomly.

Pair Corralation between Borr Drilling and Prairie Provident

Given the investment horizon of 90 days Borr Drilling is expected to under-perform the Prairie Provident. But the stock apears to be less risky and, when comparing its historical volatility, Borr Drilling is 4.51 times less risky than Prairie Provident. The stock trades about -0.2 of its potential returns per unit of risk. The Prairie Provident Resources is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  2.78  in Prairie Provident Resources on September 3, 2024 and sell it today you would lose (0.58) from holding Prairie Provident Resources or give up 20.86% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Borr Drilling  vs.  Prairie Provident Resources

Borr Drilling

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Borr Drilling has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Prairie Provident

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Prairie Provident Resources are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting basic indicators, Prairie Provident reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Borr Drilling and Prairie Provident

The main advantage of trading using opposite Borr Drilling and Prairie Provident positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Borr Drilling position performs unexpectedly, Prairie Provident 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 Prairie Provident will offset losses from the drop in Prairie Provident's long position.

The idea behind Borr Drilling and Prairie Provident Resources 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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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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.