Correlation Between Key Energy and Parker Drilling

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

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

Diversification Opportunities for Key Energy and Parker Drilling

0.0

Correlation Coefficient

Key Energy  Parker Drilling

Pay attention - limited upside

The 3 months correlation between Key and Parker is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Key Energy Services and Parker Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Parker Drilling and Key Energy 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 Key Energy Services are associated (or correlated) with Parker Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Parker Drilling has no effect on the direction of Key Energy i.e., Key Energy and Parker Drilling go up and down completely randomly.

Pair Corralation between Key Energy and Parker Drilling

If you would invest (100.00) in Parker Drilling on December 11, 2024 and sell it today you would earn a total of  100.00  from holding Parker Drilling or generate -100.0% return on investment over 90 days.

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

Key Energy Services  vs.  Parker Drilling

Key Energy Services

Risk-Adjusted Performance

Very Weak

Over the last 90 days Key Energy Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, Key Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Parker Drilling

Risk-Adjusted Performance

Very Weak

Over the last 90 days Parker Drilling has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Parker Drilling is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Key Energy and Parker Drilling

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

The idea behind Key Energy Services and Parker Drilling 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.