Correlation Between National Energy and Dawson Geophysical
Can any of the company-specific risk be diversified away by investing in both National Energy and Dawson Geophysical 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 National Energy and Dawson Geophysical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between National Energy Services and Dawson Geophysical, you can compare the effects of market volatilities on National Energy and Dawson Geophysical 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 National Energy with a short position of Dawson Geophysical. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Energy and Dawson Geophysical.
Diversification Opportunities for National Energy and Dawson Geophysical
-0.07 | Correlation Coefficient |
Good diversification
The 3 months correlation between National and Dawson is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding National Energy Services and Dawson Geophysical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dawson Geophysical and National Energy 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 National Energy Services are associated (or correlated) with Dawson Geophysical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dawson Geophysical has no effect on the direction of National Energy i.e., National Energy and Dawson Geophysical go up and down completely randomly.
Pair Corralation between National Energy and Dawson Geophysical
Given the investment horizon of 90 days National Energy Services is expected to under-perform the Dawson Geophysical. But the stock apears to be less risky and, when comparing its historical volatility, National Energy Services is 2.66 times less risky than Dawson Geophysical. The stock trades about -0.2 of its potential returns per unit of risk. The Dawson Geophysical is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest 162.00 in Dawson Geophysical on August 28, 2024 and sell it today you would lose (15.00) from holding Dawson Geophysical or give up 9.26% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
National Energy Services vs. Dawson Geophysical
Performance |
| Timeline |
| National Energy Services |
| Dawson Geophysical |
National Energy and Dawson Geophysical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Energy and Dawson Geophysical
The main advantage of trading using opposite National Energy and Dawson Geophysical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Energy position performs unexpectedly, Dawson Geophysical 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 Dawson Geophysical will offset losses from the drop in Dawson Geophysical's long position.| National Energy vs. Dawson Geophysical | National Energy vs. Mccoy Global | National Energy vs. Ranger Energy Services | National Energy vs. MRC Global |
| Dawson Geophysical vs. NXT Energy Solutions | Dawson Geophysical vs. Mccoy Global | Dawson Geophysical vs. National Energy Services | Dawson Geophysical vs. Ranger Energy Services |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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