Correlation Between Kodiak Gas and Liberty Oilfield

Can any of the company-specific risk be diversified away by investing in both Kodiak Gas and Liberty Oilfield 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 Kodiak Gas and Liberty Oilfield into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Kodiak Gas Services, and Liberty Oilfield Services, you can compare the effects of market volatilities on Kodiak Gas and Liberty Oilfield 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 Kodiak Gas with a short position of Liberty Oilfield. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kodiak Gas and Liberty Oilfield.

Diversification Opportunities for Kodiak Gas and Liberty Oilfield

-0.45

Correlation Coefficient

Kodiak Gas  Liberty Oilfield

Very good diversification

The 3 months correlation between Kodiak and Liberty is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Kodiak Gas Services, and Liberty Oilfield Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liberty Oilfield Services and Kodiak Gas 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 Kodiak Gas Services, are associated (or correlated) with Liberty Oilfield. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liberty Oilfield Services has no effect on the direction of Kodiak Gas i.e., Kodiak Gas and Liberty Oilfield go up and down completely randomly.

Pair Corralation between Kodiak Gas and Liberty Oilfield

Considering the 90-day investment horizon Kodiak Gas Services, is expected to generate 0.78 times more return on investment than Liberty Oilfield. However, Kodiak Gas Services, is 1.29 times less risky than Liberty Oilfield. It trades about 0.33 of its potential returns per unit of risk. Liberty Oilfield Services is currently generating about -0.03 per unit of risk. If you would invest  2,562  in Kodiak Gas Services, on August 31, 2024 and sell it today you would earn a total of  1,420  from holding Kodiak Gas Services, or generate 55.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Kodiak Gas Services,  vs.  Liberty Oilfield Services

Kodiak Gas Services,

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Kodiak Gas Services, are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, Kodiak Gas unveiled solid returns over the last few months and may actually be approaching a breakup point.

Liberty Oilfield Services

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Liberty Oilfield Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Liberty Oilfield is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Kodiak Gas and Liberty Oilfield

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

The idea behind Kodiak Gas Services, and Liberty Oilfield Services 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.