Correlation Between Oceaneering International and Weatherford International

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

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

Diversification Opportunities for Oceaneering International and Weatherford International

0.86

Correlation Coefficient

Oceaneering International  Weatherford International

Very poor diversification

The 3 months correlation between Oceaneering and Weatherford is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Oceaneering International and Weatherford International PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Weatherford International 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 Weatherford International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Weatherford International has no effect on the direction of Oceaneering International i.e., Oceaneering International and Weatherford International go up and down completely randomly.

Pair Corralation between Oceaneering International and Weatherford International

Considering the 90-day investment horizon Oceaneering International is expected to under-perform the Weatherford International. But the stock apears to be less risky and, when comparing its historical volatility, Oceaneering International is 1.19 times less risky than Weatherford International. The stock trades about -0.22 of its potential returns per unit of risk. The Weatherford International PLC is currently generating about -0.15 of returns per unit of risk over similar time horizon. If you would invest  8,201  in Weatherford International PLC on November 28, 2024 and sell it today you would lose (1,805) from holding Weatherford International PLC or give up 22.01% of portfolio value over 90 days.

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

Oceaneering International  vs.  Weatherford International 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 March 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Weatherford International

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Oceaneering International and Weatherford International

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

The idea behind Oceaneering International and Weatherford International 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.