Correlation Between Oceaneering International and Ferguson Plc

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

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

Diversification Opportunities for Oceaneering International and Ferguson Plc

0.72

Correlation Coefficient

Oceaneering International  Ferguson Plc

Poor diversification

The 3 months correlation between Oceaneering and Ferguson is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Oceaneering International and Ferguson Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ferguson Plc and Oceaneering International 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 Oceaneering International are associated (or correlated) with Ferguson Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ferguson Plc has no effect on the direction of Oceaneering International i.e., Oceaneering International and Ferguson Plc go up and down completely randomly.

Pair Corralation between Oceaneering International and Ferguson Plc

Considering the 90-day investment horizon Oceaneering International is expected to under-perform the Ferguson Plc. In addition to that, Oceaneering International is 1.45 times more volatile than Ferguson Plc. It trades about -0.11 of its total potential returns per unit of risk. Ferguson Plc is currently generating about -0.06 per unit of volatility. If you would invest  17,270  in Ferguson Plc on December 30, 2024 and sell it today you would lose (1,219) from holding Ferguson Plc or give up 7.06% of portfolio value over 90 days.

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

Oceaneering International  vs.  Ferguson Plc

Oceaneering International

Risk-Adjusted Performance

Very Weak

Over the last 90 days Oceaneering International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's forward indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Ferguson Plc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ferguson Plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Oceaneering International and Ferguson Plc

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

The idea behind Oceaneering International and Ferguson Plc 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.