Correlation Between Natural Gas and Dawson Geophysical

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

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

Diversification Opportunities for Natural Gas and Dawson Geophysical

-0.4

Correlation Coefficient

Natural Gas  Dawson Geophysical

Very good diversification

The 3 months correlation between Natural and Dawson is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Natural Gas Services and Dawson Geophysical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dawson Geophysical and Natural Gas 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 Natural Gas Services are associated (or correlated) with Dawson Geophysical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dawson Geophysical has no effect on the direction of Natural Gas i.e., Natural Gas and Dawson Geophysical go up and down completely randomly.

Pair Corralation between Natural Gas and Dawson Geophysical

Considering the 90-day investment horizon Natural Gas Services is expected to generate 0.77 times more return on investment than Dawson Geophysical. However, Natural Gas Services is 1.29 times less risky than Dawson Geophysical. It trades about 0.05 of its potential returns per unit of risk. Dawson Geophysical is currently generating about 0.03 per unit of risk. If you would invest  2,591  in Natural Gas Services on November 20, 2024 and sell it today you would earn a total of  163.00  from holding Natural Gas Services or generate 6.29% return on investment over 90 days.

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

Natural Gas Services  vs.  Dawson Geophysical

Natural Gas Services

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Natural Gas Services are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Natural Gas may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Dawson Geophysical

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dawson Geophysical are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Dawson Geophysical is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Natural Gas and Dawson Geophysical

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

The idea behind Natural Gas Services and Dawson Geophysical 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.