Correlation Between Now and Weatherford International
Can any of the company-specific risk be diversified away by investing in both Now and Weatherford International 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 Now and Weatherford International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Now Inc and Weatherford International PLC, you can compare the effects of market volatilities on Now and Weatherford International 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 Now with a short position of Weatherford International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Now and Weatherford International.
Diversification Opportunities for Now and Weatherford International
0.13 | Correlation Coefficient |
Average diversification
The 3 months correlation between Now and Weatherford is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Now Inc and Weatherford International PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Weatherford International and Now 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 Now Inc are associated (or correlated) with Weatherford International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Weatherford International has no effect on the direction of Now i.e., Now and Weatherford International go up and down completely randomly.
Pair Corralation between Now and Weatherford International
Given the investment horizon of 90 days Now Inc is expected to under-perform the Weatherford International. But the stock apears to be less risky and, when comparing its historical volatility, Now Inc is 1.01 times less risky than Weatherford International. The stock trades about -0.02 of its potential returns per unit of risk. The Weatherford International PLC is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 11,272 in Weatherford International PLC on March 14, 2024 and sell it today you would earn a total of 157.00 from holding Weatherford International PLC or generate 1.39% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Now Inc vs. Weatherford International PLC
Performance |
Timeline |
Now Inc |
Weatherford International |
Now and Weatherford International Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Now and Weatherford International
The main advantage of trading using opposite Now and Weatherford International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Now position performs unexpectedly, Weatherford International 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 Weatherford International will offset losses from the drop in Weatherford International's long position.Now vs. Oil States International | Now vs. Oceaneering International | Now vs. Geospace Technologies | Now vs. Newpark Resources |
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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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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