Correlation Between Oil States and Kodiak Gas

Can any of the company-specific risk be diversified away by investing in both Oil States and Kodiak 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 Oil States and Kodiak Gas into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Oil States and Kodiak Gas

-0.36

Correlation Coefficient

Oil States  Kodiak Gas

Very good diversification

The 3 months correlation between Oil and Kodiak is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Oil States International and Kodiak Gas Services, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kodiak Gas Services, and Oil States 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 Oil States International are associated (or correlated) with Kodiak Gas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kodiak Gas Services, has no effect on the direction of Oil States i.e., Oil States and Kodiak Gas go up and down completely randomly.

Pair Corralation between Oil States and Kodiak Gas

Considering the 90-day investment horizon Oil States International is expected to under-perform the Kodiak Gas. In addition to that, Oil States is 1.36 times more volatile than Kodiak Gas Services,. It trades about -0.15 of its total potential returns per unit of risk. Kodiak Gas Services, is currently generating about 0.21 per unit of volatility. If you would invest  2,900  in Kodiak Gas Services, on August 1, 2024 and sell it today you would earn a total of  281.00  from holding Kodiak Gas Services, or generate 9.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.65%
Values	Daily Returns

Oil States International  vs.  Kodiak Gas Services,

Oil States International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Oil States International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's forward indicators remain comparatively stable which may send shares a bit higher in November 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Kodiak Gas Services,

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kodiak Gas Services, are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal technical and fundamental indicators, Kodiak Gas unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Oil States and Kodiak Gas

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

The idea behind Oil States International and Kodiak 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.