Correlation Between Antero Midstream and Precision Drilling

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

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

Diversification Opportunities for Antero Midstream and Precision Drilling

0.78

Correlation Coefficient

Antero Midstream  Precision Drilling

Poor diversification

The 3 months correlation between Antero and Precision is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Antero Midstream Partners and Precision Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Precision Drilling and Antero Midstream 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 Antero Midstream Partners are associated (or correlated) with Precision Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Precision Drilling has no effect on the direction of Antero Midstream i.e., Antero Midstream and Precision Drilling go up and down completely randomly.

Pair Corralation between Antero Midstream and Precision Drilling

Allowing for the 90-day total investment horizon Antero Midstream Partners is expected to generate 0.5 times more return on investment than Precision Drilling. However, Antero Midstream Partners is 2.01 times less risky than Precision Drilling. It trades about 0.31 of its potential returns per unit of risk. Precision Drilling is currently generating about 0.15 per unit of risk. If you would invest  1,227  in Antero Midstream Partners on February 18, 2024 and sell it today you would earn a total of  265.00  from holding Antero Midstream Partners or generate 21.6% return on investment over 90 days.

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

Antero Midstream Partners  vs.  Precision Drilling

Antero Midstream Partners

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Antero Midstream Partners are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady primary indicators, Antero Midstream displayed solid returns over the last few months and may actually be approaching a breakup point.

Precision Drilling

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Precision Drilling are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak fundamental indicators, Precision Drilling unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Antero Midstream and Precision Drilling

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

The idea behind Antero Midstream Partners and Precision Drilling 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.