Correlation Between Halliburton and MRC Global

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

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

Diversification Opportunities for Halliburton and MRC Global

0.64

Correlation Coefficient

Halliburton  MRC Global

Poor diversification

The 3 months correlation between Halliburton and MRC is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Halliburton and MRC Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MRC Global and Halliburton 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 Halliburton are associated (or correlated) with MRC Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MRC Global has no effect on the direction of Halliburton i.e., Halliburton and MRC Global go up and down completely randomly.

Pair Corralation between Halliburton and MRC Global

Considering the 90-day investment horizon Halliburton is expected to under-perform the MRC Global. But the stock apears to be less risky and, when comparing its historical volatility, Halliburton is 1.14 times less risky than MRC Global. The stock trades about -0.33 of its potential returns per unit of risk. The MRC Global is currently generating about -0.24 of returns per unit of risk over similar time horizon. If you would invest  1,250  in MRC Global on February 3, 2024 and sell it today you would lose (107.00) from holding MRC Global or give up 8.56% of portfolio value over 90 days.

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

Halliburton  vs.  MRC Global

Halliburton

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Halliburton are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite abnormal basic indicators, Halliburton may actually be approaching a critical reversion point that can send shares even higher in June 2024.

MRC Global

Risk-Adjusted Performance

6 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in MRC Global are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, MRC Global may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Halliburton and MRC Global

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

The idea behind Halliburton and MRC Global 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.