Correlation Between Liberty Oilfield and MRC Global

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

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

Diversification Opportunities for Liberty Oilfield and MRC Global

0.77

Correlation Coefficient

Liberty Oilfield  MRC Global

Poor diversification

The 3 months correlation between Liberty and MRC is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Liberty Oilfield Services and MRC Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MRC Global and Liberty Oilfield 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 Liberty Oilfield Services are associated (or correlated) with MRC Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MRC Global has no effect on the direction of Liberty Oilfield i.e., Liberty Oilfield and MRC Global go up and down completely randomly.

Pair Corralation between Liberty Oilfield and MRC Global

Given the investment horizon of 90 days Liberty Oilfield Services is expected to under-perform the MRC Global. In addition to that, Liberty Oilfield is 1.17 times more volatile than MRC Global. It trades about -0.09 of its total potential returns per unit of risk. MRC Global is currently generating about -0.02 per unit of volatility. If you would invest  1,263  in MRC Global on December 27, 2024 and sell it today you would lose (63.00) from holding MRC Global or give up 4.99% of portfolio value over 90 days.

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

Liberty Oilfield Services  vs.  MRC Global

Liberty Oilfield Services

Risk-Adjusted Performance

Very Weak

Over the last 90 days Liberty Oilfield Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

MRC Global

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Liberty Oilfield and MRC Global

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

The idea behind Liberty Oilfield Services and MRC Global 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.