Correlation Between Core Laboratories and Dawson Geophysical

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

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

Diversification Opportunities for Core Laboratories and Dawson Geophysical

0.18

Correlation Coefficient

Core Laboratories  Dawson Geophysical

Average diversification

The 3 months correlation between Core and Dawson is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Core Laboratories NV and Dawson Geophysical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dawson Geophysical and Core Laboratories 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 Core Laboratories NV are associated (or correlated) with Dawson Geophysical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dawson Geophysical has no effect on the direction of Core Laboratories i.e., Core Laboratories and Dawson Geophysical go up and down completely randomly.

Pair Corralation between Core Laboratories and Dawson Geophysical

Considering the 90-day investment horizon Core Laboratories NV is expected to under-perform the Dawson Geophysical. But the stock apears to be less risky and, when comparing its historical volatility, Core Laboratories NV is 1.38 times less risky than Dawson Geophysical. The stock trades about -0.05 of its potential returns per unit of risk. The Dawson Geophysical is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  140.00  in Dawson Geophysical on December 26, 2024 and sell it today you would lose (12.00) from holding Dawson Geophysical or give up 8.57% of portfolio value over 90 days.

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

Core Laboratories NV  vs.  Dawson Geophysical

Core Laboratories

Risk-Adjusted Performance

Very Weak

Over the last 90 days Core Laboratories NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's essential indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Dawson Geophysical

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Core Laboratories and Dawson Geophysical

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

The idea behind Core Laboratories NV and Dawson Geophysical 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.