Correlation Between Major Drilling and Nabors Industries

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

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

Diversification Opportunities for Major Drilling and Nabors Industries

0.19

Correlation Coefficient

Major Drilling  Nabors Industries

Average diversification

The 3 months correlation between Major and Nabors is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Major Drilling Group and Nabors Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nabors Industries and Major Drilling 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 Major Drilling Group are associated (or correlated) with Nabors Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nabors Industries has no effect on the direction of Major Drilling i.e., Major Drilling and Nabors Industries go up and down completely randomly.

Pair Corralation between Major Drilling and Nabors Industries

Assuming the 90 days horizon Major Drilling Group is expected to generate 0.62 times more return on investment than Nabors Industries. However, Major Drilling Group is 1.61 times less risky than Nabors Industries. It trades about -0.01 of its potential returns per unit of risk. Nabors Industries is currently generating about -0.03 per unit of risk. If you would invest  735.00  in Major Drilling Group on October 24, 2024 and sell it today you would lose (155.00) from holding Major Drilling Group or give up 21.09% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Major Drilling Group  vs.  Nabors Industries

Major Drilling Group

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Major Drilling Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, Major Drilling may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Nabors Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nabors Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward indicators, Nabors Industries is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Major Drilling and Nabors Industries

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

The idea behind Major Drilling Group and Nabors Industries 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.