Correlation Between Weatherford International and Adams Resources

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

By analyzing existing cross correlation between Weatherford International PLC and Adams Resources Energy, you can compare the effects of market volatilities on Weatherford International and Adams Resources 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 Weatherford International with a short position of Adams Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Weatherford International and Adams Resources.

Diversification Opportunities for Weatherford International and Adams Resources

-0.81

Correlation Coefficient

Weatherford International  Adams Resources

Pay attention - limited upside

The 3 months correlation between Weatherford and Adams is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Weatherford International PLC and Adams Resources Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adams Resources Energy and Weatherford International 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 Weatherford International PLC are associated (or correlated) with Adams Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adams Resources Energy has no effect on the direction of Weatherford International i.e., Weatherford International and Adams Resources go up and down completely randomly.

Pair Corralation between Weatherford International and Adams Resources

Given the investment horizon of 90 days Weatherford International PLC is expected to under-perform the Adams Resources. In addition to that, Weatherford International is 6.78 times more volatile than Adams Resources Energy. It trades about -0.18 of its total potential returns per unit of risk. Adams Resources Energy is currently generating about 0.16 per unit of volatility. If you would invest  3,696  in Adams Resources Energy on December 1, 2024 and sell it today you would earn a total of  102.00  from holding Adams Resources Energy or generate 2.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	73.33%
Values	Daily Returns

Weatherford International PLC  vs.  Adams Resources Energy

Weatherford International

Risk-Adjusted Performance

Very Weak

Over the last 90 days Weatherford International PLC 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 rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Adams Resources Energy

Risk-Adjusted Performance

Good

Over the last 90 days Adams Resources Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Adams Resources is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Weatherford International and Adams Resources

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

The idea behind Weatherford International PLC and Adams Resources Energy 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.