Correlation Between Superior Drilling and Enservco

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

By analyzing existing cross correlation between Superior Drilling Products and Enservco Co, you can compare the effects of market volatilities on Superior Drilling and Enservco 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 Superior Drilling with a short position of Enservco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Superior Drilling and Enservco.

Diversification Opportunities for Superior Drilling and Enservco

0.59

Correlation Coefficient

Superior Drilling  Enservco

Very weak diversification

The 3 months correlation between Superior and Enservco is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Superior Drilling Products and Enservco Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enservco and Superior Drilling 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 Superior Drilling Products are associated (or correlated) with Enservco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enservco has no effect on the direction of Superior Drilling i.e., Superior Drilling and Enservco go up and down completely randomly.

Pair Corralation between Superior Drilling and Enservco

Given the investment horizon of 90 days Superior Drilling Products is expected to generate 1.22 times more return on investment than Enservco. However, Superior Drilling is 1.22 times more volatile than Enservco Co. It trades about -0.04 of its potential returns per unit of risk. Enservco Co is currently generating about -0.06 per unit of risk. If you would invest  69.00  in Superior Drilling Products on September 20, 2024 and sell it today you would lose (69.00) from holding Superior Drilling Products or give up 100.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	69.09%
Values	Daily Returns

Superior Drilling Products  vs.  Enservco Co

Superior Drilling

Risk-Adjusted Performance

0 of 100

Very Weak

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

Enservco

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Enservco Co 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 fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Superior Drilling and Enservco

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

The idea behind Superior Drilling Products and Enservco Co 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.