Correlation Between Weatherford International and Solaris Energy

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

Diversification Opportunities for Weatherford International and Solaris Energy

-0.68

Correlation Coefficient

Weatherford International  Solaris Energy

Excellent diversification

The 3 months correlation between Weatherford and Solaris is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Weatherford International PLC and Solaris Energy Infrastructure, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solaris Energy Infra 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 Solaris Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solaris Energy Infra has no effect on the direction of Weatherford International i.e., Weatherford International and Solaris Energy go up and down completely randomly.

Pair Corralation between Weatherford International and Solaris Energy

Given the investment horizon of 90 days Weatherford International is expected to generate 3.29 times less return on investment than Solaris Energy. But when comparing it to its historical volatility, Weatherford International PLC is 1.33 times less risky than Solaris Energy. It trades about 0.03 of its potential returns per unit of risk. Solaris Energy Infrastructure, is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  951.00  in Solaris Energy Infrastructure, on October 23, 2024 and sell it today you would earn a total of  2,181  from holding Solaris Energy Infrastructure, or generate 229.34% return on investment over 90 days.

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

Weatherford International PLC  vs.  Solaris Energy Infrastructure,

Weatherford International

Risk-Adjusted Performance

0 of 100

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 latest weak performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Solaris Energy Infra

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Solaris Energy Infrastructure, are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile technical and fundamental indicators, Solaris Energy demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Weatherford International and Solaris Energy

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

The idea behind Weatherford International PLC and Solaris Energy Infrastructure, 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.