Correlation Between Paul Mueller and Precision Drilling

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

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

Diversification Opportunities for Paul Mueller and Precision Drilling

0.44

Correlation Coefficient

Paul Mueller  Precision Drilling

Very weak diversification

The 3 months correlation between Paul and Precision is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Paul Mueller Co and Precision Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Precision Drilling and Paul Mueller 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 Paul Mueller Co 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 Paul Mueller i.e., Paul Mueller and Precision Drilling go up and down completely randomly.

Pair Corralation between Paul Mueller and Precision Drilling

Given the investment horizon of 90 days Paul Mueller is expected to generate 1.0 times less return on investment than Precision Drilling. In addition to that, Paul Mueller is 1.16 times more volatile than Precision Drilling. It trades about 0.19 of its total potential returns per unit of risk. Precision Drilling is currently generating about 0.22 per unit of volatility. If you would invest  5,927  in Precision Drilling on January 29, 2024 and sell it today you would earn a total of  1,303  from holding Precision Drilling or generate 21.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	51.16%
Values	Daily Returns

Paul Mueller Co  vs.  Precision Drilling

Paul Mueller

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Paul Mueller Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent technical and fundamental indicators, Paul Mueller is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Precision Drilling

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Precision Drilling are ranked lower than 9 (%) 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 Paul Mueller and Precision Drilling

The main advantage of trading using opposite Paul Mueller and Precision Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Paul Mueller 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 Paul Mueller Co 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.