Correlation Between Oceaneering International and Select Energy

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

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

Diversification Opportunities for Oceaneering International and Select Energy

0.84

Correlation Coefficient

Oceaneering International  Select Energy

Very poor diversification

The 3 months correlation between Oceaneering and Select is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Oceaneering International and Select Energy Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Select Energy Services 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 Select Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Select Energy Services has no effect on the direction of Oceaneering International i.e., Oceaneering International and Select Energy go up and down completely randomly.

Pair Corralation between Oceaneering International and Select Energy

Considering the 90-day investment horizon Oceaneering International is expected to under-perform the Select Energy. In addition to that, Oceaneering International is 1.05 times more volatile than Select Energy Services. It trades about -0.47 of its total potential returns per unit of risk. Select Energy Services is currently generating about -0.39 per unit of volatility. If you would invest  1,469  in Select Energy Services on September 23, 2024 and sell it today you would lose (217.00) from holding Select Energy Services or give up 14.77% 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.  Select Energy Services

Oceaneering International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Oceaneering International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong forward indicators, Oceaneering International is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Select Energy Services

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Select Energy Services are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain basic indicators, Select Energy may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Oceaneering International and Select Energy

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

The idea behind Oceaneering International and Select Energy Services 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.