Correlation Between Bakken Water and Oil States

Can any of the company-specific risk be diversified away by investing in both Bakken Water 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 Bakken Water and Oil States into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bakken Water Transfer and Oil States International, you can compare the effects of market volatilities on Bakken Water 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 Bakken Water with a short position of Oil States. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bakken Water and Oil States.

Diversification Opportunities for Bakken Water and Oil States

0.25

Correlation Coefficient

Bakken Water  Oil States

Modest diversification

The 3 months correlation between Bakken and Oil is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Bakken Water Transfer 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 Bakken Water 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 Bakken Water Transfer 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 Bakken Water i.e., Bakken Water and Oil States go up and down completely randomly.

Pair Corralation between Bakken Water and Oil States

Given the investment horizon of 90 days Bakken Water Transfer is expected to generate 4.73 times more return on investment than Oil States. However, Bakken Water is 4.73 times more volatile than Oil States International. It trades about 0.18 of its potential returns per unit of risk. Oil States International is currently generating about 0.02 per unit of risk. If you would invest  1.80  in Bakken Water Transfer on September 17, 2024 and sell it today you would earn a total of  4.20  from holding Bakken Water Transfer or generate 233.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Bakken Water Transfer  vs.  Oil States International

Bakken Water Transfer

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bakken Water Transfer are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Bakken Water showed solid returns over the last few months and may actually be approaching a breakup point.

Oil States International

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Oil States International are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable forward indicators, Oil States is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Bakken Water and Oil States

The main advantage of trading using opposite Bakken Water and Oil States positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bakken Water 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.

The idea behind Bakken Water Transfer and Oil States International 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.