Correlation Between Precision Drilling and Hooker Furniture

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

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

Diversification Opportunities for Precision Drilling and Hooker Furniture

0.7

Correlation Coefficient

Precision Drilling  Hooker Furniture

Poor diversification

The 3 months correlation between Precision and Hooker is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Precision Drilling and Hooker Furniture in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hooker Furniture 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 Hooker Furniture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hooker Furniture has no effect on the direction of Precision Drilling i.e., Precision Drilling and Hooker Furniture go up and down completely randomly.

Pair Corralation between Precision Drilling and Hooker Furniture

Considering the 90-day investment horizon Precision Drilling is expected to under-perform the Hooker Furniture. But the stock apears to be less risky and, when comparing its historical volatility, Precision Drilling is 1.31 times less risky than Hooker Furniture. The stock trades about -0.05 of its potential returns per unit of risk. The Hooker Furniture is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  1,404  in Hooker Furniture on September 29, 2024 and sell it today you would lose (63.00) from holding Hooker Furniture or give up 4.49% of portfolio value over 90 days.

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

Precision Drilling  vs.  Hooker Furniture

Precision Drilling

Risk-Adjusted Performance

0 of 100

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.

Hooker Furniture

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hooker Furniture has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Precision Drilling and Hooker Furniture

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

The idea behind Precision Drilling and Hooker Furniture 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.