Correlation Between Now and Tetra Technologies
Can any of the company-specific risk be diversified away by investing in both Now and Tetra Technologies 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 Now and Tetra Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Now Inc and Tetra Technologies, you can compare the effects of market volatilities on Now and Tetra Technologies 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 Now with a short position of Tetra Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Now and Tetra Technologies.
Diversification Opportunities for Now and Tetra Technologies
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Now and Tetra is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Now Inc and Tetra Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tetra Technologies and Now 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 Now Inc are associated (or correlated) with Tetra Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tetra Technologies has no effect on the direction of Now i.e., Now and Tetra Technologies go up and down completely randomly.
Pair Corralation between Now and Tetra Technologies
Given the investment horizon of 90 days Now Inc is expected to generate 1.09 times more return on investment than Tetra Technologies. However, Now is 1.09 times more volatile than Tetra Technologies. It trades about 0.39 of its potential returns per unit of risk. Tetra Technologies is currently generating about 0.3 per unit of risk. If you would invest 1,187 in Now Inc on September 3, 2024 and sell it today you would earn a total of 318.00 from holding Now Inc or generate 26.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Now Inc vs. Tetra Technologies
Performance |
| Timeline |
| Now Inc |
| Tetra Technologies |
Now and Tetra Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Now and Tetra Technologies
The main advantage of trading using opposite Now and Tetra Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Now position performs unexpectedly, Tetra Technologies 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 Tetra Technologies will offset losses from the drop in Tetra Technologies' long position.| Now vs. Oil States International | Now vs. Oceaneering International | Now vs. Geospace Technologies | Now vs. Newpark Resources |
| Tetra Technologies vs. MRC Global | Tetra Technologies vs. Oil States International | Tetra Technologies vs. Ranger Energy Services | Tetra Technologies vs. Oceaneering International |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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