Correlation Between National Energy and Ranger Energy

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

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

Diversification Opportunities for National Energy and Ranger Energy

-0.5

Correlation Coefficient

National Energy  Ranger Energy

Very good diversification

The 3 months correlation between National and Ranger is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding National Energy Services and Ranger Energy Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ranger Energy Services and National 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 National Energy Services are associated (or correlated) with Ranger Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ranger Energy Services has no effect on the direction of National Energy i.e., National Energy and Ranger Energy go up and down completely randomly.

Pair Corralation between National Energy and Ranger Energy

Given the investment horizon of 90 days National Energy Services is expected to under-perform the Ranger Energy. In addition to that, National Energy is 1.12 times more volatile than Ranger Energy Services. It trades about -0.02 of its total potential returns per unit of risk. Ranger Energy Services is currently generating about 0.13 per unit of volatility. If you would invest  1,011  in Ranger Energy Services on October 9, 2024 and sell it today you would earn a total of  589.00  from holding Ranger Energy Services or generate 58.26% return on investment over 90 days.

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

National Energy Services  vs.  Ranger Energy Services

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.

Ranger Energy Services

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ranger Energy Services are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak technical and fundamental indicators, Ranger Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with National Energy and Ranger Energy

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

The idea behind National Energy Services and Ranger 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.

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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.