Correlation Between Weatherford International and Select Energy
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 Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Weatherford International PLC vs. Select Energy Services
Performance |
Timeline |
Weatherford International |
Select Energy Services |
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.Weatherford International vs. Bristow Group | Weatherford International vs. RPC Inc | Weatherford International vs. NOV Inc | Weatherford International vs. Oceaneering International |
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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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