Correlation Between Nine Energy and Formidable Fortress

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

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

Diversification Opportunities for Nine Energy and Formidable Fortress

0.46

Correlation Coefficient

Nine Energy  Formidable Fortress

Very weak diversification

The 3 months correlation between Nine and Formidable is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Nine Energy Service and Formidable Fortress ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Formidable Fortress ETF and Nine 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 Nine Energy Service are associated (or correlated) with Formidable Fortress. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Formidable Fortress ETF has no effect on the direction of Nine Energy i.e., Nine Energy and Formidable Fortress go up and down completely randomly.

Pair Corralation between Nine Energy and Formidable Fortress

Given the investment horizon of 90 days Nine Energy Service is expected to under-perform the Formidable Fortress. In addition to that, Nine Energy is 12.09 times more volatile than Formidable Fortress ETF. It trades about -0.07 of its total potential returns per unit of risk. Formidable Fortress ETF is currently generating about -0.15 per unit of volatility. If you would invest  3,034  in Formidable Fortress ETF on December 4, 2024 and sell it today you would lose (155.00) from holding Formidable Fortress ETF or give up 5.11% of portfolio value over 90 days.

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

Nine Energy Service  vs.  Formidable Fortress ETF

Nine Energy Service

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nine Energy Service has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Formidable Fortress ETF

Risk-Adjusted Performance

Very Weak

Over the last 90 days Formidable Fortress ETF has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Formidable Fortress is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Nine Energy and Formidable Fortress

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

The idea behind Nine Energy Service and Formidable Fortress ETF 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.