Correlation Between PRECISION DRILLING and UNICHARM

Can any of the company-specific risk be diversified away by investing in both PRECISION DRILLING and UNICHARM 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 UNICHARM 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 UNICHARM, you can compare the effects of market volatilities on PRECISION DRILLING and UNICHARM 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 UNICHARM. Check out your portfolio center. Please also check ongoing floating volatility patterns of PRECISION DRILLING and UNICHARM.

Diversification Opportunities for PRECISION DRILLING and UNICHARM

-0.46

Correlation Coefficient

PRECISION DRILLING  UNICHARM

Very good diversification

The 3 months correlation between PRECISION and UNICHARM is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding PRECISION DRILLING P and UNICHARM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UNICHARM 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 UNICHARM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UNICHARM has no effect on the direction of PRECISION DRILLING i.e., PRECISION DRILLING and UNICHARM go up and down completely randomly.

Pair Corralation between PRECISION DRILLING and UNICHARM

Assuming the 90 days trading horizon PRECISION DRILLING P is expected to under-perform the UNICHARM. But the stock apears to be less risky and, when comparing its historical volatility, PRECISION DRILLING P is 1.04 times less risky than UNICHARM. The stock trades about -0.27 of its potential returns per unit of risk. The UNICHARM is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest  813.00  in UNICHARM on September 28, 2024 and sell it today you would lose (26.00) from holding UNICHARM or give up 3.2% of portfolio value over 90 days.

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

PRECISION DRILLING P  vs.  UNICHARM

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.

UNICHARM

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days UNICHARM has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with PRECISION DRILLING and UNICHARM

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

The idea behind PRECISION DRILLING P and UNICHARM 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..