Correlation Between Nine Energy and Invesco SP

Can any of the company-specific risk be diversified away by investing in both Nine Energy and Invesco SP 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 Invesco SP 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 Invesco SP MidCap, you can compare the effects of market volatilities on Nine Energy and Invesco SP 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 Invesco SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nine Energy and Invesco SP.

Diversification Opportunities for Nine Energy and Invesco SP

0.23

Correlation Coefficient

Nine Energy  Invesco SP

Modest diversification

The 3 months correlation between Nine and Invesco is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Nine Energy Service and Invesco SP MidCap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco SP MidCap 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 Invesco SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco SP MidCap has no effect on the direction of Nine Energy i.e., Nine Energy and Invesco SP go up and down completely randomly.

Pair Corralation between Nine Energy and Invesco SP

Given the investment horizon of 90 days Nine Energy Service is expected to generate 5.15 times more return on investment than Invesco SP. However, Nine Energy is 5.15 times more volatile than Invesco SP MidCap. It trades about 0.09 of its potential returns per unit of risk. Invesco SP MidCap is currently generating about -0.06 per unit of risk. If you would invest  99.00  in Nine Energy Service on December 28, 2024 and sell it today you would earn a total of  25.00  from holding Nine Energy Service or generate 25.25% return on investment over 90 days.

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

Nine Energy Service  vs.  Invesco SP MidCap

Nine Energy Service

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nine Energy Service are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, Nine Energy exhibited solid returns over the last few months and may actually be approaching a breakup point.

Invesco SP MidCap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Invesco SP MidCap has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, Invesco SP is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Nine Energy and Invesco SP

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

The idea behind Nine Energy Service and Invesco SP MidCap 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 Stocks Directory module to find actively traded stocks across global markets.