Correlation Between CES Energy and Precision Drilling

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Can any of the company-specific risk be diversified away by investing in both CES Energy 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 CES Energy and Precision Drilling into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CES Energy Solutions and Precision Drilling, you can compare the effects of market volatilities on CES Energy 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 CES Energy with a short position of Precision Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of CES Energy and Precision Drilling.

Diversification Opportunities for CES Energy and Precision Drilling

0.92
  Correlation Coefficient

Almost no diversification

The 3 months correlation between CES and Precision is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding CES Energy Solutions and Precision Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Precision Drilling and CES Energy 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 CES Energy Solutions 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 CES Energy i.e., CES Energy and Precision Drilling go up and down completely randomly.

Pair Corralation between CES Energy and Precision Drilling

Assuming the 90 days trading horizon CES Energy Solutions is expected to generate 0.68 times more return on investment than Precision Drilling. However, CES Energy Solutions is 1.46 times less risky than Precision Drilling. It trades about 0.21 of its potential returns per unit of risk. Precision Drilling is currently generating about 0.12 per unit of risk. If you would invest  609.00  in CES Energy Solutions on April 22, 2025 and sell it today you would earn a total of  140.00  from holding CES Energy Solutions or generate 22.99% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

CES Energy Solutions  vs.  Precision Drilling

 Performance 
       Timeline  
CES Energy Solutions 

Risk-Adjusted Performance

Solid

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in CES Energy Solutions are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, CES Energy displayed solid returns over the last few months and may actually be approaching a breakup point.
Precision Drilling 

Risk-Adjusted Performance

OK

 
Weak
 
Strong
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 very unfluctuating basic indicators, Precision Drilling displayed solid returns over the last few months and may actually be approaching a breakup point.

CES Energy and Precision Drilling Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with CES Energy and Precision Drilling

The main advantage of trading using opposite CES Energy and Precision Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CES Energy 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 CES Energy Solutions 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.

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