Correlation Between Dril Quip and Liberty Oilfield

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

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

Diversification Opportunities for Dril Quip and Liberty Oilfield

0.32

Correlation Coefficient

Dril Quip  Liberty Oilfield

Weak diversification

The 3 months correlation between Dril and Liberty is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Dril Quip 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 Dril Quip 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 Dril Quip 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 Dril Quip i.e., Dril Quip and Liberty Oilfield go up and down completely randomly.

Pair Corralation between Dril Quip and Liberty Oilfield

Considering the 90-day investment horizon Dril Quip is expected to under-perform the Liberty Oilfield. In addition to that, Dril Quip is 1.04 times more volatile than Liberty Oilfield Services. It trades about -0.01 of its total potential returns per unit of risk. Liberty Oilfield Services is currently generating about 0.04 per unit of volatility. If you would invest  2,063  in Liberty Oilfield Services on June 24, 2024 and sell it today you would earn a total of  29.00  from holding Liberty Oilfield Services or generate 1.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	57.14%
Values	Daily Returns

Dril Quip  vs.  Liberty Oilfield Services

Dril Quip

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dril Quip has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in October 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Liberty Oilfield Services

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Liberty Oilfield Services are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Liberty Oilfield is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Dril Quip and Liberty Oilfield

The main advantage of trading using opposite Dril Quip and Liberty Oilfield positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dril Quip 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 Dril Quip 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.