Correlation Between Tetra Technologies and Liberty Oilfield

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

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

Diversification Opportunities for Tetra Technologies and Liberty Oilfield

-0.35

Correlation Coefficient

Tetra Technologies  Liberty Oilfield

Very good diversification

The 3 months correlation between Tetra and Liberty is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Tetra Technologies 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 Tetra Technologies 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 Tetra Technologies 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 Tetra Technologies i.e., Tetra Technologies and Liberty Oilfield go up and down completely randomly.

Pair Corralation between Tetra Technologies and Liberty Oilfield

Considering the 90-day investment horizon Tetra Technologies is expected to generate 1.0 times less return on investment than Liberty Oilfield. In addition to that, Tetra Technologies is 1.33 times more volatile than Liberty Oilfield Services. It trades about 0.02 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  1,539  in Liberty Oilfield Services on August 31, 2024 and sell it today you would earn a total of  305.00  from holding Liberty Oilfield Services or generate 19.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.79%
Values	Daily Returns

Tetra Technologies  vs.  Liberty Oilfield Services

Tetra Technologies

Risk-Adjusted Performance

8 of 100

OK

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

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 Tetra Technologies and Liberty Oilfield

The main advantage of trading using opposite Tetra Technologies and Liberty Oilfield positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tetra Technologies 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 Tetra Technologies 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.