Correlation Between Weatherford International and Select Energy

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

Diversification Opportunities for Weatherford International and Select Energy

-0.29
  Correlation Coefficient

Very good diversification

The 3 months correlation between Weatherford and Select is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Weatherford International PLC and Select Energy Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Select Energy Services 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 Select Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Select Energy Services has no effect on the direction of Weatherford International i.e., Weatherford International and Select Energy go up and down completely randomly.

Pair Corralation between Weatherford International and Select Energy

Given the investment horizon of 90 days Weatherford International PLC is expected to under-perform the Select Energy. In addition to that, Weatherford International is 1.51 times more volatile than Select Energy Services. It trades about -0.16 of its total potential returns per unit of risk. Select Energy Services is currently generating about 0.2 per unit of volatility. If you would invest  1,370  in Select Energy Services on September 14, 2024 and sell it today you would earn a total of  90.00  from holding Select Energy Services or generate 6.57% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Weatherford International PLC  vs.  Select Energy Services

 Performance 
       Timeline  
Weatherford International 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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 January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.
Select Energy Services 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Select Energy Services are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Select Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Weatherford International and Select Energy Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Weatherford International and Select Energy

The main advantage of trading using opposite Weatherford International and Select Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Weatherford International position performs unexpectedly, Select 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 Select Energy will offset losses from the drop in Select Energy's long position.
The idea behind Weatherford International PLC and Select 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.
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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.

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