Correlation Between NCS Multistage and Select Energy

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

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

Diversification Opportunities for NCS Multistage and Select Energy

0.83

Correlation Coefficient

NCS Multistage  Select Energy

Very poor diversification

The 3 months correlation between NCS and Select is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding NCS Multistage Holdings and Select Energy Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Select Energy Services and NCS Multistage 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 NCS Multistage Holdings are associated (or correlated) with Select Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Select Energy Services has no effect on the direction of NCS Multistage i.e., NCS Multistage and Select Energy go up and down completely randomly.

Pair Corralation between NCS Multistage and Select Energy

Given the investment horizon of 90 days NCS Multistage is expected to generate 1.6 times less return on investment than Select Energy. In addition to that, NCS Multistage is 1.03 times more volatile than Select Energy Services. It trades about 0.05 of its total potential returns per unit of risk. Select Energy Services is currently generating about 0.09 per unit of volatility. If you would invest  739.00  in Select Energy Services on September 24, 2024 and sell it today you would earn a total of  513.00  from holding Select Energy Services or generate 69.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	97.59%
Values	Daily Returns

NCS Multistage Holdings  vs.  Select Energy Services

NCS Multistage Holdings

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NCS Multistage Holdings are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, NCS Multistage displayed solid returns over the last few months and may actually be approaching a breakup point.

Select Energy Services

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Select Energy Services are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Select Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NCS Multistage and Select Energy

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

The idea behind NCS Multistage Holdings and Select Energy 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.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.