Correlation Between Contango ORE and Nabors Industries

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

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

Diversification Opportunities for Contango ORE and Nabors Industries

0.78

Correlation Coefficient

Contango ORE  Nabors Industries

Poor diversification

The 3 months correlation between Contango and Nabors is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Contango ORE and Nabors Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nabors Industries and Contango ORE 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 Contango ORE 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 Contango ORE i.e., Contango ORE and Nabors Industries go up and down completely randomly.

Pair Corralation between Contango ORE and Nabors Industries

Given the investment horizon of 90 days Contango ORE is expected to under-perform the Nabors Industries. But the stock apears to be less risky and, when comparing its historical volatility, Contango ORE is 1.01 times less risky than Nabors Industries. The stock trades about -0.26 of its potential returns per unit of risk. The Nabors Industries is currently generating about -0.12 of returns per unit of risk over similar time horizon. If you would invest  6,863  in Nabors Industries on October 12, 2024 and sell it today you would lose (639.00) from holding Nabors Industries or give up 9.31% of portfolio value over 90 days.

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

Contango ORE  vs.  Nabors Industries

Contango ORE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Contango ORE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm 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 February 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Contango ORE and Nabors Industries

The main advantage of trading using opposite Contango ORE and Nabors Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Contango ORE 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 Contango ORE 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.