Correlation Between Spring Valley and Precision Drilling

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

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

Diversification Opportunities for Spring Valley and Precision Drilling

0.58

Correlation Coefficient

Spring Valley  Precision Drilling

Very weak diversification

The 3 months correlation between Spring and Precision is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Spring Valley Acquisition and Precision Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Precision Drilling and Spring Valley 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 Spring Valley Acquisition 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 Spring Valley i.e., Spring Valley and Precision Drilling go up and down completely randomly.

Pair Corralation between Spring Valley and Precision Drilling

Assuming the 90 days horizon Spring Valley Acquisition is expected to generate 6.5 times more return on investment than Precision Drilling. However, Spring Valley is 6.5 times more volatile than Precision Drilling. It trades about 0.16 of its potential returns per unit of risk. Precision Drilling is currently generating about 0.15 per unit of risk. If you would invest  7.45  in Spring Valley Acquisition on April 26, 2025 and sell it today you would earn a total of  6.55  from holding Spring Valley Acquisition or generate 87.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	72.13%
Values	Daily Returns

Spring Valley Acquisition  vs.  Precision Drilling

Spring Valley Acquisition

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Spring Valley Acquisition are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak forward indicators, Spring Valley reported solid returns over the last few months and may actually be approaching a breakup point.

Precision Drilling

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Precision Drilling are ranked lower than 11 (%) 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.

Pair Trading with Spring Valley and Precision Drilling

The main advantage of trading using opposite Spring Valley and Precision Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Spring Valley 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 Spring Valley Acquisition 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.