Correlation Between Oil States and Natural Gas
Can any of the company-specific risk be diversified away by investing in both Oil States and Natural Gas 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 Oil States and Natural Gas into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Oil States International and Natural Gas Services, you can compare the effects of market volatilities on Oil States and Natural Gas 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 Oil States with a short position of Natural Gas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Oil States and Natural Gas.
Diversification Opportunities for Oil States and Natural Gas
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Oil and Natural is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Oil States International and Natural Gas Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Natural Gas Services and Oil States 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 Oil States International are associated (or correlated) with Natural Gas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Natural Gas Services has no effect on the direction of Oil States i.e., Oil States and Natural Gas go up and down completely randomly.
Pair Corralation between Oil States and Natural Gas
Considering the 90-day investment horizon Oil States is expected to generate 1.32 times less return on investment than Natural Gas. In addition to that, Oil States is 1.17 times more volatile than Natural Gas Services. It trades about 0.3 of its total potential returns per unit of risk. Natural Gas Services is currently generating about 0.47 per unit of volatility. If you would invest 1,993 in Natural Gas Services on August 27, 2024 and sell it today you would earn a total of 752.00 from holding Natural Gas Services or generate 37.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Oil States International vs. Natural Gas Services
Performance |
| Timeline |
| Oil States International |
| Natural Gas Services |
Oil States and Natural Gas Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Oil States and Natural Gas
The main advantage of trading using opposite Oil States and Natural Gas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oil States position performs unexpectedly, Natural Gas 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 Natural Gas will offset losses from the drop in Natural Gas' long position.| Oil States vs. ProPetro Holding Corp | Oil States vs. RPC Inc | Oil States vs. MRC Global | Oil States vs. Expro Group Holdings |
| Natural Gas vs. ProPetro Holding Corp | Natural Gas vs. RPC Inc | Natural Gas vs. MRC Global | Natural Gas 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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