Correlation Between North American and Trican Well

Can any of the company-specific risk be diversified away by investing in both North American and Trican Well 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 North American and Trican Well into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between North American Construction and Trican Well Service, you can compare the effects of market volatilities on North American and Trican Well 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 North American with a short position of Trican Well. Check out your portfolio center. Please also check ongoing floating volatility patterns of North American and Trican Well.

Diversification Opportunities for North American and Trican Well

-0.31

Correlation Coefficient

North American  Trican Well

Very good diversification

The 3 months correlation between North and Trican is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding North American Construction and Trican Well Service in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trican Well Service and North American 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 North American Construction are associated (or correlated) with Trican Well. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trican Well Service has no effect on the direction of North American i.e., North American and Trican Well go up and down completely randomly.

Pair Corralation between North American and Trican Well

Assuming the 90 days trading horizon North American Construction is expected to under-perform the Trican Well. But the stock apears to be less risky and, when comparing its historical volatility, North American Construction is 1.27 times less risky than Trican Well. The stock trades about -0.22 of its potential returns per unit of risk. The Trican Well Service is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  410.00  in Trican Well Service on January 24, 2024 and sell it today you would earn a total of  17.00  from holding Trican Well Service or generate 4.15% return on investment over 90 days.

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

North American Construction  vs.  Trican Well Service

North American Const

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days North American Construction has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Trican Well Service

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Trican Well Service has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Trican Well is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with North American and Trican Well

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

The idea behind North American Construction and Trican Well Service 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.

Check out your portfolio center.

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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.