Correlation Between Precision Drilling and Maple Leaf

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

By analyzing existing cross correlation between Precision Drilling and Maple Leaf Foods, you can compare the effects of market volatilities on Precision Drilling and Maple Leaf 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 Maple Leaf. Check out your portfolio center. Please also check ongoing floating volatility patterns of Precision Drilling and Maple Leaf.

Diversification Opportunities for Precision Drilling and Maple Leaf

0.82

Correlation Coefficient

Precision Drilling  Maple Leaf

Very poor diversification

The 3 months correlation between Precision and Maple is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Precision Drilling and Maple Leaf Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Maple Leaf Foods 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 are associated (or correlated) with Maple Leaf. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Maple Leaf Foods has no effect on the direction of Precision Drilling i.e., Precision Drilling and Maple Leaf go up and down completely randomly.

Pair Corralation between Precision Drilling and Maple Leaf

Assuming the 90 days horizon Precision Drilling is expected to generate 2.11 times more return on investment than Maple Leaf. However, Precision Drilling is 2.11 times more volatile than Maple Leaf Foods. It trades about 0.13 of its potential returns per unit of risk. Maple Leaf Foods is currently generating about 0.26 per unit of risk. If you would invest  5,978  in Precision Drilling on April 24, 2025 and sell it today you would earn a total of  1,229  from holding Precision Drilling or generate 20.56% return on investment over 90 days.

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

Precision Drilling  vs.  Maple Leaf Foods

Precision Drilling

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Precision Drilling are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Precision Drilling displayed solid returns over the last few months and may actually be approaching a breakup point.

Maple Leaf Foods

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Maple Leaf Foods are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal forward indicators, Maple Leaf displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Precision Drilling and Maple Leaf

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

The idea behind Precision Drilling and Maple Leaf Foods 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.