Correlation Between RPC and Oil States
Can any of the company-specific risk be diversified away by investing in both RPC and Oil States 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 RPC and Oil States into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between RPC Inc and Oil States International, you can compare the effects of market volatilities on RPC and Oil States 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 RPC with a short position of Oil States. Check out your portfolio center. Please also check ongoing floating volatility patterns of RPC and Oil States.
Diversification Opportunities for RPC and Oil States
0.15 | Correlation Coefficient |
Average diversification
The 3 months correlation between RPC and Oil is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding RPC Inc and Oil States International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oil States International and RPC 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 RPC Inc are associated (or correlated) with Oil States. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oil States International has no effect on the direction of RPC i.e., RPC and Oil States go up and down completely randomly.
Pair Corralation between RPC and Oil States
Considering the 90-day investment horizon RPC is expected to generate 2.0 times less return on investment than Oil States. But when comparing it to its historical volatility, RPC Inc is 1.28 times less risky than Oil States. It trades about 0.19 of its potential returns per unit of risk. Oil States International is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest 435.00 in Oil States International on August 27, 2024 and sell it today you would earn a total of 116.00 from holding Oil States International or generate 26.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
RPC Inc vs. Oil States International
Performance |
| Timeline |
| RPC Inc |
| Oil States International |
RPC and Oil States Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with RPC and Oil States
The main advantage of trading using opposite RPC and Oil States positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RPC position performs unexpectedly, Oil States 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 Oil States will offset losses from the drop in Oil States' long position.The idea behind RPC Inc and Oil States International pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Oil States vs. ProPetro Holding Corp | Oil States vs. RPC Inc | Oil States vs. MRC Global | Oil States 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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