Correlation Between Tidewater and Oil States

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

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

Diversification Opportunities for Tidewater and Oil States

-0.6

Correlation Coefficient

Tidewater  Oil States

Excellent diversification

The 3 months correlation between Tidewater and Oil is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Tidewater and Oil States International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oil States International 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 Oil States. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oil States International has no effect on the direction of Tidewater i.e., Tidewater and Oil States go up and down completely randomly.

Pair Corralation between Tidewater and Oil States

Considering the 90-day investment horizon Tidewater is expected to under-perform the Oil States. In addition to that, Tidewater is 1.13 times more volatile than Oil States International. It trades about -0.28 of its total potential returns per unit of risk. Oil States International is currently generating about -0.08 per unit of volatility. If you would invest  550.00  in Oil States International on September 12, 2024 and sell it today you would lose (22.00) from holding Oil States International or give up 4.0% of portfolio value over 90 days.

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

Tidewater  vs.  Oil States International

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 January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Oil States International

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Oil States International are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent forward indicators, Oil States unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tidewater and Oil States

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

The idea behind Tidewater and Oil States International 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.