Correlation Between Weatherford International and Natural Gas

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

Diversification Opportunities for Weatherford International and Natural Gas

-0.24

Correlation Coefficient

Weatherford International  Natural Gas

Very good diversification

The 3 months correlation between Weatherford and Natural is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Weatherford International PLC and Natural Gas Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Natural Gas Services 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 Natural Gas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Natural Gas Services has no effect on the direction of Weatherford International i.e., Weatherford International and Natural Gas go up and down completely randomly.

Pair Corralation between Weatherford International and Natural Gas

Given the investment horizon of 90 days Weatherford International PLC is expected to under-perform the Natural Gas. In addition to that, Weatherford International is 1.04 times more volatile than Natural Gas Services. It trades about -0.04 of its total potential returns per unit of risk. Natural Gas Services is currently generating about 0.23 per unit of volatility. If you would invest  1,925  in Natural Gas Services on September 5, 2024 and sell it today you would earn a total of  835.00  from holding Natural Gas Services or generate 43.38% 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.  Natural Gas Services

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 latest weak performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Natural Gas Services

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Natural Gas Services are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady technical and fundamental indicators, Natural Gas unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Weatherford International and Natural Gas

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

The idea behind Weatherford International PLC and Natural Gas 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.