Correlation Between Cumulus Media and Nabors Industries

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

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

Diversification Opportunities for Cumulus Media and Nabors Industries

0.4

Correlation Coefficient

Cumulus Media  Nabors Industries

Very weak diversification

The 3 months correlation between Cumulus and Nabors is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Cumulus Media Class and Nabors Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nabors Industries and Cumulus Media 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 Cumulus Media Class 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 Cumulus Media i.e., Cumulus Media and Nabors Industries go up and down completely randomly.

Pair Corralation between Cumulus Media and Nabors Industries

Given the investment horizon of 90 days Cumulus Media Class is expected to under-perform the Nabors Industries. In addition to that, Cumulus Media is 1.68 times more volatile than Nabors Industries. It trades about -0.07 of its total potential returns per unit of risk. Nabors Industries is currently generating about -0.01 per unit of volatility. If you would invest  7,017  in Nabors Industries on October 23, 2024 and sell it today you would lose (346.00) from holding Nabors Industries or give up 4.93% of portfolio value over 90 days.

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

Cumulus Media Class  vs.  Nabors Industries

Cumulus Media Class

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cumulus Media Class has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's essential indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private 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 relatively invariable fundamental drivers, Nabors Industries is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Cumulus Media and Nabors Industries

The main advantage of trading using opposite Cumulus Media and Nabors Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cumulus Media 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 Cumulus Media Class 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.