Correlation Between Oceaneering International and Tidewater

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

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

Diversification Opportunities for Oceaneering International and Tidewater

-0.38

Correlation Coefficient

Oceaneering International  Tidewater

Very good diversification

The 3 months correlation between Oceaneering and Tidewater is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Oceaneering International and Tidewater in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tidewater and Oceaneering International 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 Oceaneering International are associated (or correlated) with Tidewater. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tidewater has no effect on the direction of Oceaneering International i.e., Oceaneering International and Tidewater go up and down completely randomly.

Pair Corralation between Oceaneering International and Tidewater

Considering the 90-day investment horizon Oceaneering International is expected to generate 1.03 times more return on investment than Tidewater. However, Oceaneering International is 1.03 times more volatile than Tidewater. It trades about 0.11 of its potential returns per unit of risk. Tidewater is currently generating about -0.23 per unit of risk. If you would invest  2,505  in Oceaneering International on August 31, 2024 and sell it today you would earn a total of  493.00  from holding Oceaneering International or generate 19.68% return on investment over 90 days.

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

Oceaneering International  vs.  Tidewater

Oceaneering International

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Oceaneering International are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak forward indicators, Oceaneering International demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Tidewater

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tidewater has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's fundamental indicators remain fairly stable which may send shares a bit higher in December 2024. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Oceaneering International and Tidewater

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

The idea behind Oceaneering International and Tidewater 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.