Correlation Between Oil States and North American
Can any of the company-specific risk be diversified away by investing in both Oil States and North American 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 North American 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 North American Construction, you can compare the effects of market volatilities on Oil States and North American 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 North American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Oil States and North American.
Diversification Opportunities for Oil States and North American
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Oil and North is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Oil States International and North American Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on North American Const 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 North American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of North American Const has no effect on the direction of Oil States i.e., Oil States and North American go up and down completely randomly.
Pair Corralation between Oil States and North American
Considering the 90-day investment horizon Oil States International is expected to generate 1.21 times more return on investment than North American. However, Oil States is 1.21 times more volatile than North American Construction. It trades about 0.04 of its potential returns per unit of risk. North American Construction is currently generating about 0.05 per unit of risk. If you would invest 521.00 in Oil States International on August 28, 2024 and sell it today you would earn a total of 30.00 from holding Oil States International or generate 5.76% 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. North American Construction
Performance |
| Timeline |
| Oil States International |
| North American Const |
Oil States and North American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Oil States and North American
The main advantage of trading using opposite Oil States and North American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oil States position performs unexpectedly, North American 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 North American will offset losses from the drop in North American's long position.| Oil States vs. ProPetro Holding Corp | Oil States vs. RPC Inc | Oil States vs. MRC Global | Oil States vs. Expro Group Holdings |
| North American vs. ProPetro Holding Corp | North American vs. RPC Inc | North American vs. MRC Global | North American 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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