Correlation Between North American and Ranger Energy
Can any of the company-specific risk be diversified away by investing in both North American and Ranger 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 North American and Ranger Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between North American Construction and Ranger Energy Services, you can compare the effects of market volatilities on North American and Ranger 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 North American with a short position of Ranger Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of North American and Ranger Energy.
Diversification Opportunities for North American and Ranger Energy
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between North and Ranger is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding North American Construction and Ranger Energy Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ranger Energy Services and North American 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 North American Construction are associated (or correlated) with Ranger Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ranger Energy Services has no effect on the direction of North American i.e., North American and Ranger Energy go up and down completely randomly.
Pair Corralation between North American and Ranger Energy
Considering the 90-day investment horizon North American is expected to generate 1.5 times less return on investment than Ranger Energy. In addition to that, North American is 1.81 times more volatile than Ranger Energy Services. It trades about 0.25 of its total potential returns per unit of risk. Ranger Energy Services is currently generating about 0.68 per unit of volatility. If you would invest 1,259 in Ranger Energy Services on August 28, 2024 and sell it today you would earn a total of 391.00 from holding Ranger Energy Services or generate 31.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
North American Construction vs. Ranger Energy Services
Performance |
| Timeline |
| North American Const |
| Ranger Energy Services |
North American and Ranger Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with North American and Ranger Energy
The main advantage of trading using opposite North American and Ranger Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if North American position performs unexpectedly, Ranger 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 Ranger Energy will offset losses from the drop in Ranger Energy's long position.| North American vs. Geospace Technologies | North American vs. MRC Global | North American vs. Natural Gas Services | North American vs. Now Inc |
| Ranger Energy vs. Newpark Resources | Ranger Energy vs. ProPetro Holding Corp | Ranger Energy vs. RPC Inc | Ranger Energy vs. MRC Global |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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