Correlation Between Halliburton and Dawson Geophysical

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

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

Diversification Opportunities for Halliburton and Dawson Geophysical

0.15

Correlation Coefficient

Halliburton  Dawson Geophysical

Average diversification

The 3 months correlation between Halliburton and Dawson is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Halliburton and Dawson Geophysical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dawson Geophysical and Halliburton 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 Halliburton 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 Halliburton i.e., Halliburton and Dawson Geophysical go up and down completely randomly.

Pair Corralation between Halliburton and Dawson Geophysical

Considering the 90-day investment horizon Halliburton is expected to under-perform the Dawson Geophysical. But the stock apears to be less risky and, when comparing its historical volatility, Halliburton is 2.04 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 0.01 of returns per unit of risk over similar time horizon. If you would invest  133.00  in Dawson Geophysical on December 30, 2024 and sell it today you would lose (4.00) from holding Dawson Geophysical or give up 3.01% of portfolio value over 90 days.

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

Halliburton  vs.  Dawson Geophysical

Halliburton

Risk-Adjusted Performance

Very Weak

Over the last 90 days Halliburton has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Halliburton is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional 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 Halliburton and Dawson Geophysical

The main advantage of trading using opposite Halliburton and Dawson Geophysical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Halliburton 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 Halliburton 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.

Check out your portfolio center.

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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.