Correlation Between Oil States and Now

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

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

Diversification Opportunities for Oil States and Now

0.26

Correlation Coefficient

Oil States  Now

Modest diversification

The 3 months correlation between Oil and Now is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Oil States International and Now Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Now Inc and Oil States 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 Oil States International are associated (or correlated) with Now. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Now Inc has no effect on the direction of Oil States i.e., Oil States and Now go up and down completely randomly.

Pair Corralation between Oil States and Now

Considering the 90-day investment horizon Oil States is expected to generate 2.1 times less return on investment than Now. But when comparing it to its historical volatility, Oil States International is 1.17 times less risky than Now. It trades about 0.08 of its potential returns per unit of risk. Now Inc is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1,313  in Now Inc on December 26, 2024 and sell it today you would earn a total of  383.00  from holding Now Inc or generate 29.17% return on investment over 90 days.

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

Oil States International  vs.  Now Inc

Oil States International

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Oil States International are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent forward indicators, Oil States unveiled solid returns over the last few months and may actually be approaching a breakup point.

Now Inc

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Now Inc are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Now showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Oil States and Now

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

The idea behind Oil States International and Now Inc 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.