Correlation Between BW Offshore and Nabors Industries

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

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

Diversification Opportunities for BW Offshore and Nabors Industries

-0.47

Correlation Coefficient

BW Offshore  Nabors Industries

Very good diversification

The 3 months correlation between BWOFY and Nabors is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding BW Offshore Limited and Nabors Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nabors Industries and BW Offshore 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 BW Offshore Limited 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 BW Offshore i.e., BW Offshore and Nabors Industries go up and down completely randomly.

Pair Corralation between BW Offshore and Nabors Industries

Assuming the 90 days horizon BW Offshore Limited is expected to generate 0.1 times more return on investment than Nabors Industries. However, BW Offshore Limited is 10.04 times less risky than Nabors Industries. It trades about 0.22 of its potential returns per unit of risk. Nabors Industries is currently generating about -0.8 per unit of risk. If you would invest  550.00  in BW Offshore Limited on September 25, 2024 and sell it today you would earn a total of  5.00  from holding BW Offshore Limited or generate 0.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

BW Offshore Limited  vs.  Nabors Industries

BW Offshore Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BW Offshore Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, BW Offshore is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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. Even with weak performance in the last few months, the Stock's fundamental drivers remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with BW Offshore and Nabors Industries

The main advantage of trading using opposite BW Offshore and Nabors Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BW Offshore 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 BW Offshore Limited 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.