Correlation Between Weatherford International and North American
Can any of the company-specific risk be diversified away by investing in both Weatherford International 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 Weatherford International and North American 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 North American Construction, you can compare the effects of market volatilities on Weatherford International 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 Weatherford International with a short position of North American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Weatherford International and North American.
Diversification Opportunities for Weatherford International and North American
-0.29 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Weatherford and North is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Weatherford International PLC 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 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 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 Weatherford International i.e., Weatherford International and North American go up and down completely randomly.
Pair Corralation between Weatherford International and North American
Given the investment horizon of 90 days Weatherford International PLC is expected to under-perform the North American. In addition to that, Weatherford International is 1.38 times more volatile than North American Construction. It trades about -0.1 of its total potential returns per unit of risk. North American Construction is currently generating about 0.01 per unit of volatility. If you would invest 1,955 in North American Construction on November 1, 2024 and sell it today you would lose (4.00) from holding North American Construction or give up 0.2% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Weatherford International PLC vs. North American Construction
Performance |
| Timeline |
| Weatherford International |
| North American Const |
Weatherford International and North American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Weatherford International and North American
The main advantage of trading using opposite Weatherford International and North American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Weatherford International 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.| Weatherford International vs. Bristow Group | Weatherford International vs. RPC Inc | Weatherford International vs. NOV Inc | Weatherford International vs. Oceaneering International |
| North American vs. Geospace Technologies | North American vs. MRC Global | North American vs. Natural Gas Services | North American 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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