Correlation Between National Energy and Drilling Tools

Can any of the company-specific risk be diversified away by investing in both National Energy and Drilling Tools 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 National Energy and Drilling Tools into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between National Energy Services and Drilling Tools International, you can compare the effects of market volatilities on National Energy and Drilling Tools 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 National Energy with a short position of Drilling Tools. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Energy and Drilling Tools.

Diversification Opportunities for National Energy and Drilling Tools

-0.43

Correlation Coefficient

National Energy  Drilling Tools

Very good diversification

The 3 months correlation between National and Drilling is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding National Energy Services and Drilling Tools International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Drilling Tools Inter and National Energy 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 National Energy Services are associated (or correlated) with Drilling Tools. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Drilling Tools Inter has no effect on the direction of National Energy i.e., National Energy and Drilling Tools go up and down completely randomly.

Pair Corralation between National Energy and Drilling Tools

Assuming the 90 days horizon National Energy Services is expected to generate 4.09 times more return on investment than Drilling Tools. However, National Energy is 4.09 times more volatile than Drilling Tools International. It trades about 0.21 of its potential returns per unit of risk. Drilling Tools International is currently generating about 0.01 per unit of risk. If you would invest  18.00  in National Energy Services on May 7, 2025 and sell it today you would earn a total of  32.00  from holding National Energy Services or generate 177.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	66.13%
Values	Daily Returns

National Energy Services  vs.  Drilling Tools International

National Energy Services

Risk-Adjusted Performance

Solid

Over the last 90 days National Energy Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly unfluctuating basic indicators, National Energy showed solid returns over the last few months and may actually be approaching a breakup point.

Drilling Tools Inter

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Drilling Tools International are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Drilling Tools is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with National Energy and Drilling Tools

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

The idea behind National Energy Services and Drilling Tools International 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.

Check out your portfolio center.

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 Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.