Correlation Between Weatherford International and Prairie Provident

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

Diversification Opportunities for Weatherford International and Prairie Provident

-0.48

Correlation Coefficient

Weatherford International  Prairie Provident

Very good diversification

The 3 months correlation between Weatherford and Prairie is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Weatherford International PLC and Prairie Provident Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prairie Provident 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 Prairie Provident. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prairie Provident has no effect on the direction of Weatherford International i.e., Weatherford International and Prairie Provident go up and down completely randomly.

Pair Corralation between Weatherford International and Prairie Provident

Given the investment horizon of 90 days Weatherford International PLC is expected to under-perform the Prairie Provident. But the stock apears to be less risky and, when comparing its historical volatility, Weatherford International PLC is 14.1 times less risky than Prairie Provident. The stock trades about -0.16 of its potential returns per unit of risk. The Prairie Provident Resources is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  2.20  in Prairie Provident Resources on November 28, 2024 and sell it today you would earn a total of  0.60  from holding Prairie Provident Resources or generate 27.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	89.83%
Values	Daily Returns

Weatherford International PLC  vs.  Prairie Provident Resources

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.

Prairie Provident

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Prairie Provident Resources are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Prairie Provident reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Weatherford International and Prairie Provident

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

The idea behind Weatherford International PLC and Prairie Provident Resources 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 Global Correlations module to find global opportunities by holding instruments from different markets.