Correlation Between Datang International and Nabors Industries

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

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

Diversification Opportunities for Datang International and Nabors Industries

0.59

Correlation Coefficient

Datang International  Nabors Industries

Very weak diversification

The 3 months correlation between Datang and Nabors is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Datang International Power and Nabors Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nabors Industries and Datang International 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 Datang International Power 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 Datang International i.e., Datang International and Nabors Industries go up and down completely randomly.

Pair Corralation between Datang International and Nabors Industries

Assuming the 90 days horizon Datang International Power is expected to under-perform the Nabors Industries. In addition to that, Datang International is 1.02 times more volatile than Nabors Industries. It trades about -0.01 of its total potential returns per unit of risk. Nabors Industries is currently generating about 0.03 per unit of volatility. If you would invest  6,700  in Nabors Industries on September 1, 2024 and sell it today you would earn a total of  200.00  from holding Nabors Industries or generate 2.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.48%
Values	Daily Returns

Datang International Power  vs.  Nabors Industries

Datang International

Risk-Adjusted Performance

0 of 100

Very Weak

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

Nabors Industries

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Nabors Industries are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward indicators, Nabors Industries may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Datang International and Nabors Industries

The main advantage of trading using opposite Datang International and Nabors Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Datang International 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 Datang International Power 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.