Correlation Between Superior Drilling and Nextier Oilfield

Can any of the company-specific risk be diversified away by investing in both Superior Drilling and Nextier 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 Superior Drilling and Nextier Oilfield 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 Nextier Oilfield Solutions, you can compare the effects of market volatilities on Superior Drilling and Nextier 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 Superior Drilling with a short position of Nextier Oilfield. Check out your portfolio center. Please also check ongoing floating volatility patterns of Superior Drilling and Nextier Oilfield.

Diversification Opportunities for Superior Drilling and Nextier Oilfield

-0.54

Correlation Coefficient

Superior Drilling  Nextier Oilfield

Excellent diversification

The 3 months correlation between Superior and Nextier is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Superior Drilling Products and Nextier Oilfield Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nextier Oilfield Sol 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 Nextier Oilfield. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nextier Oilfield Sol has no effect on the direction of Superior Drilling i.e., Superior Drilling and Nextier Oilfield go up and down completely randomly.

Pair Corralation between Superior Drilling and Nextier Oilfield

Given the investment horizon of 90 days Superior Drilling Products is expected to under-perform the Nextier Oilfield. In addition to that, Superior Drilling is 1.84 times more volatile than Nextier Oilfield Solutions. It trades about -0.02 of its total potential returns per unit of risk. Nextier Oilfield Solutions is currently generating about 0.06 per unit of volatility. If you would invest  919.00  in Nextier Oilfield Solutions on September 19, 2024 and sell it today you would earn a total of  216.00  from holding Nextier Oilfield Solutions or generate 23.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	35.5%
Values	Daily Returns

Superior Drilling Products  vs.  Nextier Oilfield Solutions

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.

Nextier Oilfield Sol

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nextier Oilfield Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, Nextier Oilfield is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Superior Drilling and Nextier Oilfield

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

The idea behind Superior Drilling Products and Nextier Oilfield Solutions 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.

Check out your portfolio center.

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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.