Correlation Between Natural Gas and Core Laboratories

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

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

Diversification Opportunities for Natural Gas and Core Laboratories

0.75

Correlation Coefficient

Natural Gas  Core Laboratories

Poor diversification

The 3 months correlation between Natural and Core is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Natural Gas Services and Core Laboratories NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Core Laboratories and Natural 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 Natural Gas Services are associated (or correlated) with Core Laboratories. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Core Laboratories has no effect on the direction of Natural Gas i.e., Natural Gas and Core Laboratories go up and down completely randomly.

Pair Corralation between Natural Gas and Core Laboratories

Considering the 90-day investment horizon Natural Gas Services is expected to generate 0.9 times more return on investment than Core Laboratories. However, Natural Gas Services is 1.11 times less risky than Core Laboratories. It trades about 0.19 of its potential returns per unit of risk. Core Laboratories NV is currently generating about 0.06 per unit of risk. If you would invest  2,040  in Natural Gas Services on September 3, 2024 and sell it today you would earn a total of  752.00  from holding Natural Gas Services or generate 36.86% return on investment over 90 days.

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

Natural Gas Services  vs.  Core Laboratories NV

Natural Gas Services

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Natural Gas Services are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, Natural Gas unveiled solid returns over the last few months and may actually be approaching a breakup point.

Core Laboratories

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Core Laboratories NV are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting essential indicators, Core Laboratories may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Natural Gas and Core Laboratories

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

The idea behind Natural Gas Services and Core Laboratories NV 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.