Correlation Between Nine Energy and Two Roads
Can any of the company-specific risk be diversified away by investing in both Nine Energy and Two Roads 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 Nine Energy and Two Roads into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nine Energy Service and Two Roads Shared, you can compare the effects of market volatilities on Nine Energy and Two Roads 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 Nine Energy with a short position of Two Roads. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nine Energy and Two Roads.
Diversification Opportunities for Nine Energy and Two Roads
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Nine and Two is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Nine Energy Service and Two Roads Shared in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Two Roads Shared and Nine 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 Nine Energy Service are associated (or correlated) with Two Roads. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Two Roads Shared has no effect on the direction of Nine Energy i.e., Nine Energy and Two Roads go up and down completely randomly.
Pair Corralation between Nine Energy and Two Roads
Given the investment horizon of 90 days Nine Energy Service is expected to generate 8.86 times more return on investment than Two Roads. However, Nine Energy is 8.86 times more volatile than Two Roads Shared. It trades about 0.06 of its potential returns per unit of risk. Two Roads Shared is currently generating about 0.02 per unit of risk. If you would invest 118.00 in Nine Energy Service on September 13, 2024 and sell it today you would earn a total of 5.00 from holding Nine Energy Service or generate 4.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nine Energy Service vs. Two Roads Shared
Performance |
| Timeline |
| Nine Energy Service |
| Two Roads Shared |
Nine Energy and Two Roads Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nine Energy and Two Roads
The main advantage of trading using opposite Nine Energy and Two Roads positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nine Energy position performs unexpectedly, Two Roads 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 Two Roads will offset losses from the drop in Two Roads' long position.| Nine Energy vs. Liberty Oilfield Services | Nine Energy vs. ProFrac Holding Corp | Nine Energy vs. Helix Energy Solutions | Nine Energy vs. Newpark Resources |
| Two Roads vs. Vanguard Momentum Factor | Two Roads vs. Vanguard Multifactor | Two Roads vs. Vanguard Value Factor | Two Roads vs. Vanguard Minimum Volatility |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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