Correlation Between Ranger Energy and Superior Drilling

Can any of the company-specific risk be diversified away by investing in both Ranger Energy and Superior Drilling 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 Ranger Energy and Superior Drilling into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ranger Energy Services and Superior Drilling Products, you can compare the effects of market volatilities on Ranger Energy and Superior Drilling 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 Ranger Energy with a short position of Superior Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ranger Energy and Superior Drilling.

Diversification Opportunities for Ranger Energy and Superior Drilling

-0.22

Correlation Coefficient

Ranger Energy  Superior Drilling

Very good diversification

The 3 months correlation between Ranger and Superior is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Ranger Energy Services and Superior Drilling Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Superior Drilling and Ranger Energy 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 Ranger Energy Services are associated (or correlated) with Superior Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Superior Drilling has no effect on the direction of Ranger Energy i.e., Ranger Energy and Superior Drilling go up and down completely randomly.

Pair Corralation between Ranger Energy and Superior Drilling

Given the investment horizon of 90 days Ranger Energy is expected to generate 3.53 times less return on investment than Superior Drilling. But when comparing it to its historical volatility, Ranger Energy Services is 1.89 times less risky than Superior Drilling. It trades about 0.01 of its potential returns per unit of risk. Superior Drilling Products is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  131.00  in Superior Drilling Products on February 23, 2024 and sell it today you would lose (2.99) from holding Superior Drilling Products or give up 2.28% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Ranger Energy Services  vs.  Superior Drilling Products

Ranger Energy Services

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ranger Energy Services are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical and fundamental indicators, Ranger Energy is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Superior Drilling

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Superior Drilling Products are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain basic indicators, Superior Drilling demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ranger Energy and Superior Drilling

The main advantage of trading using opposite Ranger Energy and Superior Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ranger Energy position performs unexpectedly, Superior Drilling 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 Superior Drilling will offset losses from the drop in Superior Drilling's long position.

The idea behind Ranger Energy Services and Superior Drilling Products 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.

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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 Bonds Directory module to find actively traded corporate debentures issued by US companies.