Correlation Between Oil States and Liberty Oilfield

Can any of the company-specific risk be diversified away by investing in both Oil States and Liberty Oilfield 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 Liberty Oilfield 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 Liberty Oilfield Services, you can compare the effects of market volatilities on Oil States and Liberty Oilfield 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 Liberty Oilfield. Check out your portfolio center. Please also check ongoing floating volatility patterns of Oil States and Liberty Oilfield.

Diversification Opportunities for Oil States and Liberty Oilfield

0.41

Correlation Coefficient

Oil States  Liberty Oilfield

Very weak diversification

The 3 months correlation between Oil and Liberty is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Oil States International and Liberty Oilfield Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liberty Oilfield Services 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 Liberty Oilfield. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liberty Oilfield Services has no effect on the direction of Oil States i.e., Oil States and Liberty Oilfield go up and down completely randomly.

Pair Corralation between Oil States and Liberty Oilfield

Considering the 90-day investment horizon Oil States International is expected to generate 1.02 times more return on investment than Liberty Oilfield. However, Oil States is 1.02 times more volatile than Liberty Oilfield Services. It trades about 0.09 of its potential returns per unit of risk. Liberty Oilfield Services is currently generating about -0.09 per unit of risk. If you would invest  480.00  in Oil States International on December 27, 2024 and sell it today you would earn a total of  66.00  from holding Oil States International or generate 13.75% return on investment over 90 days.

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

Oil States International  vs.  Liberty Oilfield Services

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.

Liberty Oilfield Services

Risk-Adjusted Performance

Very Weak

Over the last 90 days Liberty Oilfield Services 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 comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Oil States and Liberty Oilfield

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

The idea behind Oil States International and Liberty Oilfield 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.