Correlation Between Core Laboratories and Natural Gas

Can any of the company-specific risk be diversified away by investing in both Core Laboratories and Natural Gas 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 Natural Gas 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 Natural Gas Services, you can compare the effects of market volatilities on Core Laboratories and Natural Gas 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 Natural Gas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Core Laboratories and Natural Gas.

Diversification Opportunities for Core Laboratories and Natural Gas

0.84

Correlation Coefficient

Core Laboratories  Natural Gas

Very poor diversification

The 3 months correlation between Core and Natural is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Core Laboratories NV and Natural Gas Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Natural Gas Services 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 Natural Gas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Natural Gas Services has no effect on the direction of Core Laboratories i.e., Core Laboratories and Natural Gas go up and down completely randomly.

Pair Corralation between Core Laboratories and Natural Gas

Considering the 90-day investment horizon Core Laboratories NV is expected to generate 1.0 times more return on investment than Natural Gas. However, Core Laboratories is 1.0 times more volatile than Natural Gas Services. It trades about -0.04 of its potential returns per unit of risk. Natural Gas Services is currently generating about -0.11 per unit of risk. If you would invest  1,706  in Core Laboratories NV on December 28, 2024 and sell it today you would lose (154.00) from holding Core Laboratories NV or give up 9.03% of portfolio value over 90 days.

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

Core Laboratories NV  vs.  Natural Gas Services

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.

Natural Gas Services

Risk-Adjusted Performance

Very Weak

Over the last 90 days Natural Gas Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Core Laboratories and Natural Gas

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

The idea behind Core Laboratories NV and Natural Gas Services 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.