Correlation Between Superior Drilling and Ranger Energy

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

Diversification Opportunities for Superior Drilling and Ranger Energy

-0.21

Correlation Coefficient

Superior Drilling  Ranger Energy

Very good diversification

The 3 months correlation between Superior and Ranger is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Superior Drilling Products and Ranger Energy Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ranger Energy Services 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 Ranger Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ranger Energy Services has no effect on the direction of Superior Drilling i.e., Superior Drilling and Ranger Energy go up and down completely randomly.

Pair Corralation between Superior Drilling and Ranger Energy

Given the investment horizon of 90 days Superior Drilling Products is expected to under-perform the Ranger Energy. In addition to that, Superior Drilling is 2.77 times more volatile than Ranger Energy Services. It trades about -0.02 of its total potential returns per unit of risk. Ranger Energy Services is currently generating about 0.04 per unit of volatility. If you would invest  1,084  in Ranger Energy Services on September 19, 2024 and sell it today you would earn a total of  400.00  from holding Ranger Energy Services or generate 36.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	80.65%
Values	Daily Returns

Superior Drilling Products  vs.  Ranger Energy Services

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.

Ranger Energy Services

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ranger Energy Services are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak technical and fundamental indicators, Ranger Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Superior Drilling and Ranger Energy

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

The idea behind Superior Drilling Products and Ranger Energy 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.