Correlation Between Dawson Geophysical and Kodiak Gas

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

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

Diversification Opportunities for Dawson Geophysical and Kodiak Gas

-0.69

Correlation Coefficient

Dawson Geophysical  Kodiak Gas

Excellent diversification

The 3 months correlation between Dawson and Kodiak is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Dawson Geophysical and Kodiak Gas Services, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kodiak Gas Services, and Dawson Geophysical 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 Dawson Geophysical are associated (or correlated) with Kodiak Gas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kodiak Gas Services, has no effect on the direction of Dawson Geophysical i.e., Dawson Geophysical and Kodiak Gas go up and down completely randomly.

Pair Corralation between Dawson Geophysical and Kodiak Gas

Given the investment horizon of 90 days Dawson Geophysical is expected to generate 1.51 times more return on investment than Kodiak Gas. However, Dawson Geophysical is 1.51 times more volatile than Kodiak Gas Services,. It trades about 0.04 of its potential returns per unit of risk. Kodiak Gas Services, is currently generating about -0.05 per unit of risk. If you would invest  139.00  in Dawson Geophysical on September 22, 2024 and sell it today you would earn a total of  2.00  from holding Dawson Geophysical or generate 1.44% return on investment over 90 days.

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

Dawson Geophysical  vs.  Kodiak Gas Services,

Dawson Geophysical

Risk-Adjusted Performance

0 of 100

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.

Kodiak Gas Services,

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Kodiak Gas Services, are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile technical and fundamental indicators, Kodiak Gas unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dawson Geophysical and Kodiak Gas

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

The idea behind Dawson Geophysical and Kodiak 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.