Correlation Between Tidewater and Liberty Oilfield

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

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

Diversification Opportunities for Tidewater and Liberty Oilfield

0.74

Correlation Coefficient

Tidewater  Liberty Oilfield

Poor diversification

The 3 months correlation between Tidewater and Liberty is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Tidewater 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 Tidewater 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 Tidewater 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 Tidewater i.e., Tidewater and Liberty Oilfield go up and down completely randomly.

Pair Corralation between Tidewater and Liberty Oilfield

Considering the 90-day investment horizon Tidewater is expected to under-perform the Liberty Oilfield. In addition to that, Tidewater is 1.0 times more volatile than Liberty Oilfield Services. It trades about -0.23 of its total potential returns per unit of risk. Liberty Oilfield Services is currently generating about -0.03 per unit of volatility. If you would invest  1,979  in Liberty Oilfield Services on August 31, 2024 and sell it today you would lose (139.00) from holding Liberty Oilfield Services or give up 7.02% of portfolio value over 90 days.

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

Tidewater  vs.  Liberty Oilfield Services

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.

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 Tidewater and Liberty Oilfield

The main advantage of trading using opposite Tidewater and Liberty Oilfield positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tidewater 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 Tidewater 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .