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

0.65

Correlation Coefficient

Weatherford International  Core Laboratories

Poor diversification

The 3 months correlation between Weatherford and Core is 0.65. 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 generate 1.11 times more return on investment than Core Laboratories. However, Weatherford International is 1.11 times more volatile than Core Laboratories NV. It trades about 0.08 of its potential returns per unit of risk. Core Laboratories NV is currently generating about 0.01 per unit of risk. If you would invest  9,203  in Weatherford International PLC on February 26, 2024 and sell it today you would earn a total of  2,312  from holding Weatherford International PLC or generate 25.12% return on investment over 90 days.

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

Weatherford International PLC  vs.  Core Laboratories NV

Weatherford International

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Weatherford International PLC are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, Weatherford International may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Core Laboratories

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Core Laboratories NV are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.