Correlation Between Wabash National and Cabo Drilling

Can any of the company-specific risk be diversified away by investing in both Wabash National and Cabo Drilling 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 Wabash National and Cabo Drilling into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Wabash National and Cabo Drilling Corp, you can compare the effects of market volatilities on Wabash National and Cabo Drilling 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 Wabash National with a short position of Cabo Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wabash National and Cabo Drilling.

Diversification Opportunities for Wabash National and Cabo Drilling

0.0

Correlation Coefficient

Wabash National  Cabo Drilling

Pay attention - limited upside

The 3 months correlation between Wabash and Cabo is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Wabash National and Cabo Drilling Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cabo Drilling Corp and Wabash National 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 Wabash National are associated (or correlated) with Cabo Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cabo Drilling Corp has no effect on the direction of Wabash National i.e., Wabash National and Cabo Drilling go up and down completely randomly.

Pair Corralation between Wabash National and Cabo Drilling

If you would invest  0.01  in Cabo Drilling Corp on December 19, 2024 and sell it today you would earn a total of  0.00  from holding Cabo Drilling Corp or generate 0.0% return on investment over 90 days.

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

Wabash National  vs.  Cabo Drilling Corp

Wabash National

Risk-Adjusted Performance

Very Weak

Over the last 90 days Wabash National has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Cabo Drilling Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cabo Drilling Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Cabo Drilling is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Wabash National and Cabo Drilling

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

The idea behind Wabash National and Cabo Drilling Corp 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.