Correlation Between Dawson Geophysical and Worley

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

By analyzing existing cross correlation between Dawson Geophysical and Worley Limited, you can compare the effects of market volatilities on Dawson Geophysical and Worley 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 Worley. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dawson Geophysical and Worley.

Diversification Opportunities for Dawson Geophysical and Worley

0.71

Correlation Coefficient

Dawson Geophysical  Worley

Poor diversification

The 3 months correlation between Dawson and Worley is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Dawson Geophysical and Worley Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Worley Limited 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 Worley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Worley Limited has no effect on the direction of Dawson Geophysical i.e., Dawson Geophysical and Worley go up and down completely randomly.

Pair Corralation between Dawson Geophysical and Worley

Given the investment horizon of 90 days Dawson Geophysical is expected to generate 1.07 times more return on investment than Worley. However, Dawson Geophysical is 1.07 times more volatile than Worley Limited. It trades about -0.02 of its potential returns per unit of risk. Worley Limited is currently generating about -0.04 per unit of risk. If you would invest  145.00  in Dawson Geophysical on September 23, 2024 and sell it today you would lose (4.00) from holding Dawson Geophysical or give up 2.76% of portfolio value over 90 days.

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

Dawson Geophysical  vs.  Worley Limited

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.

Worley Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Worley Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Dawson Geophysical and Worley

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

The idea behind Dawson Geophysical and Worley Limited 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.