Correlation Between Weatherford International and Now

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

Diversification Opportunities for Weatherford International and Now

0.08

Correlation Coefficient

Weatherford International  Now

Significant diversification

The 3 months correlation between Weatherford and Now is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Weatherford International PLC and Now Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Now Inc 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 Now. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Now Inc has no effect on the direction of Weatherford International i.e., Weatherford International and Now go up and down completely randomly.

Pair Corralation between Weatherford International and Now

Given the investment horizon of 90 days Weatherford International PLC is expected to under-perform the Now. But the stock apears to be less risky and, when comparing its historical volatility, Weatherford International PLC is 1.27 times less risky than Now. The stock trades about -0.15 of its potential returns per unit of risk. The Now Inc is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,505  in Now Inc on November 28, 2024 and sell it today you would earn a total of  101.00  from holding Now Inc or generate 6.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Weatherford International PLC  vs.  Now Inc

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 March 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Now Inc

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Now Inc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Now may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Weatherford International and Now

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

The idea behind Weatherford International PLC and Now Inc 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.