Correlation Between Liberty Oilfield and Weatherford International

Can any of the company-specific risk be diversified away by investing in both Liberty Oilfield and Weatherford International 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 Weatherford International 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 Weatherford International PLC, you can compare the effects of market volatilities on Liberty Oilfield and Weatherford International 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 Weatherford International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Liberty Oilfield and Weatherford International.

Diversification Opportunities for Liberty Oilfield and Weatherford International

-0.09

Correlation Coefficient

Liberty Oilfield  Weatherford International

Good diversification

The 3 months correlation between Liberty and Weatherford is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Liberty Oilfield Services and Weatherford International PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Weatherford International 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 Weatherford International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Weatherford International has no effect on the direction of Liberty Oilfield i.e., Liberty Oilfield and Weatherford International go up and down completely randomly.

Pair Corralation between Liberty Oilfield and Weatherford International

Given the investment horizon of 90 days Liberty Oilfield Services is expected to generate 1.1 times more return on investment than Weatherford International. However, Liberty Oilfield is 1.1 times more volatile than Weatherford International PLC. It trades about -0.01 of its potential returns per unit of risk. Weatherford International PLC is currently generating about -0.15 per unit of risk. If you would invest  1,832  in Liberty Oilfield Services on November 28, 2024 and sell it today you would lose (87.00) from holding Liberty Oilfield Services or give up 4.75% of portfolio value over 90 days.

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

Liberty Oilfield Services  vs.  Weatherford International PLC

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 comparatively stable basic indicators, Liberty Oilfield is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Weatherford International

Risk-Adjusted Performance

Very Weak

Over the last 90 days Weatherford International PLC 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 rather sound which may send shares a bit higher in March 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Liberty Oilfield and Weatherford International

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

The idea behind Liberty Oilfield Services and Weatherford International PLC 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.