Correlation Between Precision Drilling and Borr Drilling

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

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

Diversification Opportunities for Precision Drilling and Borr Drilling

0.79

Correlation Coefficient

Precision Drilling  Borr Drilling

Poor diversification

The 3 months correlation between Precision and Borr is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Precision Drilling and Borr Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Borr Drilling 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 Borr Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Borr Drilling has no effect on the direction of Precision Drilling i.e., Precision Drilling and Borr Drilling go up and down completely randomly.

Pair Corralation between Precision Drilling and Borr Drilling

Considering the 90-day investment horizon Precision Drilling is expected to generate 0.6 times more return on investment than Borr Drilling. However, Precision Drilling is 1.66 times less risky than Borr Drilling. It trades about 0.19 of its potential returns per unit of risk. Borr Drilling is currently generating about 0.07 per unit of risk. If you would invest  4,124  in Precision Drilling on May 5, 2025 and sell it today you would earn a total of  1,294  from holding Precision Drilling or generate 31.38% return on investment over 90 days.

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

Precision Drilling  vs.  Borr Drilling

Precision Drilling

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Precision Drilling are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating fundamental indicators, Precision Drilling unveiled solid returns over the last few months and may actually be approaching a breakup point.

Borr Drilling

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Borr Drilling are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Borr Drilling reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Precision Drilling and Borr Drilling

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

The idea behind Precision Drilling and Borr 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 Transaction History module to view history of all your transactions and understand their impact on performance.