Correlation Between Weatherford International and Core Laboratories

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

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

Diversification Opportunities for Weatherford International and Core Laboratories

-0.15

Correlation Coefficient

Weatherford International  Core Laboratories

Good diversification

The 3 months correlation between Weatherford and Core is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Weatherford International PLC and Core Laboratories NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Core Laboratories and Weatherford 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 Weatherford International PLC 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 Weatherford International i.e., Weatherford International and Core Laboratories go up and down completely randomly.

Pair Corralation between Weatherford International and Core Laboratories

Given the investment horizon of 90 days Weatherford International PLC is expected to under-perform the Core Laboratories. But the stock apears to be less risky and, when comparing its historical volatility, Weatherford International PLC is 1.07 times less risky than Core Laboratories. The stock trades about -0.09 of its potential returns per unit of risk. The Core Laboratories NV is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,750  in Core Laboratories NV on September 15, 2024 and sell it today you would earn a total of  194.00  from holding Core Laboratories NV or generate 11.09% return on investment over 90 days.

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

Weatherford International PLC  vs.  Core Laboratories NV

Weatherford International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Weatherford International PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Core Laboratories

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Core Laboratories NV are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting essential indicators, Core Laboratories sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Weatherford International and Core Laboratories

The main advantage of trading using opposite Weatherford International and Core Laboratories positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Weatherford International 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 Weatherford International PLC 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 Global Correlations module to find global opportunities by holding instruments from different markets.