Correlation Between NCS Multistage and National Energy

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

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

Diversification Opportunities for NCS Multistage and National Energy

-0.57

Correlation Coefficient

NCS Multistage  National Energy

Excellent diversification

The 3 months correlation between NCS and National is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding NCS Multistage Holdings and National Energy Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Energy Services and NCS Multistage 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 NCS Multistage Holdings are associated (or correlated) with National Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Energy Services has no effect on the direction of NCS Multistage i.e., NCS Multistage and National Energy go up and down completely randomly.

Pair Corralation between NCS Multistage and National Energy

Given the investment horizon of 90 days NCS Multistage is expected to generate 1.65 times less return on investment than National Energy. But when comparing it to its historical volatility, NCS Multistage Holdings is 1.14 times less risky than National Energy. It trades about 0.02 of its potential returns per unit of risk. National Energy Services is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  764.00  in National Energy Services on October 4, 2024 and sell it today you would earn a total of  129.00  from holding National Energy Services or generate 16.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

NCS Multistage Holdings  vs.  National Energy Services

NCS Multistage Holdings

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NCS Multistage Holdings are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, NCS Multistage displayed solid returns over the last few months and may actually be approaching a breakup point.

National Energy Services

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days National Energy Services has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, National Energy is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with NCS Multistage and National Energy

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

The idea behind NCS Multistage Holdings and National Energy Services 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.