Correlation Between Weatherford International and Dawson Geophysical

Can any of the company-specific risk be diversified away by investing in both Weatherford International and Dawson Geophysical 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 Dawson Geophysical 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 Dawson Geophysical, you can compare the effects of market volatilities on Weatherford International and Dawson Geophysical 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 Dawson Geophysical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Weatherford International and Dawson Geophysical.

Diversification Opportunities for Weatherford International and Dawson Geophysical

0.13

Correlation Coefficient

Weatherford International  Dawson Geophysical

Average diversification

The 3 months correlation between Weatherford and Dawson is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Weatherford International PLC and Dawson Geophysical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dawson Geophysical 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 Dawson Geophysical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dawson Geophysical has no effect on the direction of Weatherford International i.e., Weatherford International and Dawson Geophysical go up and down completely randomly.

Pair Corralation between Weatherford International and Dawson Geophysical

Given the investment horizon of 90 days Weatherford International PLC is expected to under-perform the Dawson Geophysical. But the stock apears to be less risky and, when comparing its historical volatility, Weatherford International PLC is 1.71 times less risky than Dawson Geophysical. The stock trades about -0.09 of its potential returns per unit of risk. The Dawson Geophysical is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  152.00  in Dawson Geophysical on September 15, 2024 and sell it today you would lose (2.00) from holding Dawson Geophysical or give up 1.32% of portfolio value over 90 days.

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

Weatherford International PLC  vs.  Dawson Geophysical

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.

Dawson Geophysical

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dawson Geophysical are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Dawson Geophysical is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Weatherford International and Dawson Geophysical

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

The idea behind Weatherford International PLC and Dawson Geophysical 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.