Correlation Between Weatherford International and Oil States
Can any of the company-specific risk be diversified away by investing in both Weatherford International 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 Weatherford International and Oil States 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 Oil States International, you can compare the effects of market volatilities on Weatherford International 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 Weatherford International with a short position of Oil States. Check out your portfolio center. Please also check ongoing floating volatility patterns of Weatherford International and Oil States.
Diversification Opportunities for Weatherford International and Oil States
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Weatherford and Oil is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Weatherford International PLC 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 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 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 Weatherford International i.e., Weatherford International and Oil States go up and down completely randomly.
Pair Corralation between Weatherford International and Oil States
Given the investment horizon of 90 days Weatherford International PLC is expected to generate 0.83 times more return on investment than Oil States. However, Weatherford International PLC is 1.21 times less risky than Oil States. It trades about 0.07 of its potential returns per unit of risk. Oil States International is currently generating about 0.01 per unit of risk. If you would invest 4,146 in Weatherford International PLC on August 27, 2024 and sell it today you would earn a total of 4,437 from holding Weatherford International PLC or generate 107.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Weatherford International PLC vs. Oil States International
Performance |
| Timeline |
| Weatherford International |
| Oil States International |
Weatherford International and Oil States Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Weatherford International and Oil States
The main advantage of trading using opposite Weatherford International and Oil States positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Weatherford International 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.| Weatherford International vs. ProPetro Holding Corp | Weatherford International vs. RPC Inc | Weatherford International vs. MRC Global | Weatherford International vs. Expro Group Holdings |
| 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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