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

0.52

Correlation Coefficient

PRECISION DRILLING  Nucor

Very weak diversification

The 3 months correlation between PRECISION and Nucor is 0.52. 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 0.9 times more return on investment than Nucor. However, PRECISION DRILLING P is 1.11 times less risky than Nucor. It trades about -0.05 of its potential returns per unit of risk. Nucor is currently generating about -0.06 per unit of risk. If you would invest  6,550  in PRECISION DRILLING P on September 26, 2024 and sell it today you would lose (1,150) from holding PRECISION DRILLING P or give up 17.56% 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

PRECISION DRILLING

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PRECISION DRILLING P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, PRECISION DRILLING is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Nucor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nucor has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

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.

The idea behind PRECISION DRILLING P and Nucor 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.