Correlation Between Empire Petroleum and Nabors Industries

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

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

Diversification Opportunities for Empire Petroleum and Nabors Industries

-0.6

Correlation Coefficient

Empire Petroleum  Nabors Industries

Excellent diversification

The 3 months correlation between Empire and Nabors is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Empire Petroleum Corp and Nabors Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nabors Industries and Empire Petroleum 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 Empire Petroleum Corp 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 Empire Petroleum i.e., Empire Petroleum and Nabors Industries go up and down completely randomly.

Pair Corralation between Empire Petroleum and Nabors Industries

Allowing for the 90-day total investment horizon Empire Petroleum Corp is expected to generate 1.2 times more return on investment than Nabors Industries. However, Empire Petroleum is 1.2 times more volatile than Nabors Industries. It trades about 0.01 of its potential returns per unit of risk. Nabors Industries is currently generating about -0.01 per unit of risk. If you would invest  865.00  in Empire Petroleum Corp on October 5, 2024 and sell it today you would lose (90.00) from holding Empire Petroleum Corp or give up 10.4% of portfolio value over 90 days.

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

Empire Petroleum Corp  vs.  Nabors Industries

Empire Petroleum Corp

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Empire Petroleum Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Empire Petroleum reported solid returns over the last few months and may actually be approaching a breakup point.

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 Empire Petroleum and Nabors Industries

The main advantage of trading using opposite Empire Petroleum and Nabors Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Empire Petroleum 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 Empire Petroleum Corp 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.