Correlation Between SIMON and Precision Drilling

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

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

Diversification Opportunities for SIMON and Precision Drilling

0.8

Correlation Coefficient

SIMON  Precision Drilling

Very poor diversification

The 3 months correlation between SIMON and Precision is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding SIMON PROPERTY GROUP and Precision Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Precision Drilling and SIMON 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 SIMON PROPERTY GROUP 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 SIMON i.e., SIMON and Precision Drilling go up and down completely randomly.

Pair Corralation between SIMON and Precision Drilling

Assuming the 90 days trading horizon SIMON is expected to generate 29.04 times less return on investment than Precision Drilling. But when comparing it to its historical volatility, SIMON PROPERTY GROUP is 2.76 times less risky than Precision Drilling. It trades about 0.01 of its potential returns per unit of risk. Precision Drilling is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  4,497  in Precision Drilling on May 14, 2025 and sell it today you would earn a total of  971.00  from holding Precision Drilling or generate 21.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	96.77%
Values	Daily Returns

SIMON PROPERTY GROUP  vs.  Precision Drilling

SIMON PROPERTY GROUP

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SIMON PROPERTY GROUP are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, SIMON is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

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 SIMON and Precision Drilling

The main advantage of trading using opposite SIMON and Precision Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SIMON 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 SIMON PROPERTY GROUP 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.