Correlation Between Oil States and Valaris

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

Diversification Opportunities for Oil States and Valaris

-0.17

Correlation Coefficient

Oil States  Valaris

Good diversification

The 3 months correlation between Oil and Valaris is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Oil States International and Valaris in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valaris 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 Valaris. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Valaris has no effect on the direction of Oil States i.e., Oil States and Valaris go up and down completely randomly.

Pair Corralation between Oil States and Valaris

Considering the 90-day investment horizon Oil States International is expected to generate 1.26 times more return on investment than Valaris. However, Oil States is 1.26 times more volatile than Valaris. It trades about -0.02 of its potential returns per unit of risk. Valaris is currently generating about -0.03 per unit of risk. If you would invest  848.00  in Oil States International on October 13, 2024 and sell it today you would lose (329.00) from holding Oil States International or give up 38.8% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Oil States International  vs.  Valaris

Oil States International

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Oil States International are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent forward indicators, Oil States may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Valaris

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Valaris has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Oil States and Valaris

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

The idea behind Oil States International and Valaris 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.