Correlation Between Weatherford International and Forum Energy
Can any of the company-specific risk be diversified away by investing in both Weatherford International and Forum 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 Weatherford International and Forum Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Weatherford International PLC and Forum Energy Technologies, you can compare the effects of market volatilities on Weatherford International and Forum 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 Weatherford International with a short position of Forum Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Weatherford International and Forum Energy.
Diversification Opportunities for Weatherford International and Forum Energy
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Weatherford and Forum is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Weatherford International PLC and Forum Energy Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Forum Energy Technologies and Weatherford International 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 Weatherford International PLC are associated (or correlated) with Forum Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Forum Energy Technologies has no effect on the direction of Weatherford International i.e., Weatherford International and Forum Energy go up and down completely randomly.
Pair Corralation between Weatherford International and Forum Energy
Given the investment horizon of 90 days Weatherford International PLC is expected to generate 1.07 times more return on investment than Forum Energy. However, Weatherford International is 1.07 times more volatile than Forum Energy Technologies. It trades about 0.0 of its potential returns per unit of risk. Forum Energy Technologies is currently generating about -0.05 per unit of risk. If you would invest 9,097 in Weatherford International PLC on September 12, 2024 and sell it today you would lose (1,045) from holding Weatherford International PLC or give up 11.49% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Weatherford International PLC vs. Forum Energy Technologies
Performance |
| Timeline |
| Weatherford International |
| Forum Energy Technologies |
Weatherford International and Forum Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Weatherford International and Forum Energy
The main advantage of trading using opposite Weatherford International and Forum Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Weatherford International position performs unexpectedly, Forum 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 Forum Energy will offset losses from the drop in Forum Energy's long position.| Weatherford International vs. Schlumberger NV | Weatherford International vs. Tenaris SA ADR | Weatherford International vs. Halliburton | Weatherford International vs. Now Inc |
| Forum Energy vs. Schlumberger NV | Forum Energy vs. Tenaris SA ADR | Forum Energy vs. Halliburton | Forum Energy vs. Now Inc |
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 CEOs Directory module to screen CEOs from public companies around the world.
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