Correlation Between Liberty Oilfield and Select Energy
Can any of the company-specific risk be diversified away by investing in both Liberty Oilfield 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 Liberty Oilfield and Select Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Liberty Oilfield Services and Select Energy Services, you can compare the effects of market volatilities on Liberty Oilfield 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 Liberty Oilfield with a short position of Select Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Liberty Oilfield and Select Energy.
Diversification Opportunities for Liberty Oilfield and Select Energy
-0.23 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Liberty and Select is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Liberty Oilfield Services 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 Liberty Oilfield 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 Liberty Oilfield Services 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 Liberty Oilfield i.e., Liberty Oilfield and Select Energy go up and down completely randomly.
Pair Corralation between Liberty Oilfield and Select Energy
Given the investment horizon of 90 days Liberty Oilfield is expected to generate 5.69 times less return on investment than Select Energy. But when comparing it to its historical volatility, Liberty Oilfield Services is 1.81 times less risky than Select Energy. It trades about 0.08 of its potential returns per unit of risk. Select Energy Services is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 1,072 in Select Energy Services on August 28, 2024 and sell it today you would earn a total of 374.00 from holding Select Energy Services or generate 34.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Liberty Oilfield Services vs. Select Energy Services
Performance |
| Timeline |
| Liberty Oilfield Services |
| Select Energy Services |
Liberty Oilfield and Select Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Liberty Oilfield and Select Energy
The main advantage of trading using opposite Liberty Oilfield and Select Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Liberty Oilfield 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.| Liberty Oilfield vs. Ranger Energy Services | Liberty Oilfield vs. ProFrac Holding Corp | Liberty Oilfield vs. Archrock | Liberty Oilfield vs. Newpark Resources |
| Select Energy vs. ProPetro Holding Corp | Select Energy vs. RPC Inc | Select Energy vs. MRC Global | Select Energy vs. Expro Group Holdings |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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