Correlation Between Nextier Oilfield and Superior Drilling

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

By analyzing existing cross correlation between Nextier Oilfield Solutions and Superior Drilling Products, you can compare the effects of market volatilities on Nextier Oilfield and Superior 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 Nextier Oilfield with a short position of Superior Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nextier Oilfield and Superior Drilling.

Diversification Opportunities for Nextier Oilfield and Superior Drilling

-0.54

Correlation Coefficient

Nextier Oilfield  Superior Drilling

Excellent diversification

The 3 months correlation between Nextier and Superior is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Nextier Oilfield Solutions and Superior Drilling Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Superior Drilling and Nextier 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 Nextier Oilfield Solutions are associated (or correlated) with Superior Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Superior Drilling has no effect on the direction of Nextier Oilfield i.e., Nextier Oilfield and Superior Drilling go up and down completely randomly.

Pair Corralation between Nextier Oilfield and Superior Drilling

Considering the 90-day investment horizon Nextier Oilfield Solutions is expected to generate 0.54 times more return on investment than Superior Drilling. However, Nextier Oilfield Solutions is 1.84 times less risky than Superior Drilling. It trades about 0.06 of its potential returns per unit of risk. Superior Drilling Products is currently generating about -0.02 per unit of risk. If you would invest  919.00  in Nextier Oilfield Solutions on September 19, 2024 and sell it today you would earn a total of  216.00  from holding Nextier Oilfield Solutions or generate 23.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	35.5%
Values	Daily Returns

Nextier Oilfield Solutions  vs.  Superior Drilling Products

Nextier Oilfield Sol

Risk-Adjusted Performance

0 of 100

Very Weak

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

Superior Drilling

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Superior Drilling Products has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Superior Drilling is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Nextier Oilfield and Superior Drilling

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

The idea behind Nextier Oilfield Solutions and Superior Drilling Products 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.