Correlation Between Precision Drilling and Quarterhill

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

By analyzing existing cross correlation between Precision Drilling and Quarterhill, you can compare the effects of market volatilities on Precision Drilling and Quarterhill 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 Quarterhill. Check out your portfolio center. Please also check ongoing floating volatility patterns of Precision Drilling and Quarterhill.

Diversification Opportunities for Precision Drilling and Quarterhill

-0.37

Correlation Coefficient

Precision Drilling  Quarterhill

Very good diversification

The 3 months correlation between Precision and Quarterhill is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Precision Drilling and Quarterhill in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Quarterhill 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 Quarterhill. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Quarterhill has no effect on the direction of Precision Drilling i.e., Precision Drilling and Quarterhill go up and down completely randomly.

Pair Corralation between Precision Drilling and Quarterhill

Assuming the 90 days horizon Precision Drilling is expected to generate 7.16 times less return on investment than Quarterhill. But when comparing it to its historical volatility, Precision Drilling is 1.49 times less risky than Quarterhill. It trades about 0.01 of its potential returns per unit of risk. Quarterhill is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  164.00  in Quarterhill on September 12, 2024 and sell it today you would earn a total of  9.00  from holding Quarterhill or generate 5.49% return on investment over 90 days.

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

Precision Drilling  vs.  Quarterhill

Precision Drilling

Risk-Adjusted Performance

0 of 100

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 very healthy basic indicators, Precision Drilling is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Quarterhill

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Quarterhill are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Quarterhill may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Precision Drilling and Quarterhill

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

The idea behind Precision Drilling and Quarterhill 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.