Correlation Between Core Laboratories and USA Compression

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

Diversification Opportunities for Core Laboratories and USA Compression

0.64

Correlation Coefficient

Core Laboratories  USA Compression

Poor diversification

The 3 months correlation between Core and USA is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Core Laboratories NV and USA Compression Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on USA Compression Partners 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 USA Compression. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of USA Compression Partners has no effect on the direction of Core Laboratories i.e., Core Laboratories and USA Compression go up and down completely randomly.

Pair Corralation between Core Laboratories and USA Compression

Considering the 90-day investment horizon Core Laboratories NV is expected to under-perform the USA Compression. In addition to that, Core Laboratories is 1.26 times more volatile than USA Compression Partners. It trades about -0.38 of its total potential returns per unit of risk. USA Compression Partners is currently generating about -0.09 per unit of volatility. If you would invest  2,393  in USA Compression Partners on September 28, 2024 and sell it today you would lose (87.00) from holding USA Compression Partners or give up 3.64% of portfolio value over 90 days.

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

Core Laboratories NV  vs.  USA Compression Partners

Core Laboratories

Risk-Adjusted Performance

0 of 100

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 somewhat strong essential indicators, Core Laboratories is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

USA Compression Partners

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in USA Compression Partners are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, USA Compression is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Core Laboratories and USA Compression

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

The idea behind Core Laboratories NV and USA Compression Partners 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.