Correlation Between Halliburton and NOV

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

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

Diversification Opportunities for Halliburton and NOV

0.8

Correlation Coefficient

Halliburton  NOV

Very poor diversification

The 3 months correlation between Halliburton and NOV is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Halliburton and NOV Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NOV Inc and Halliburton 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 Halliburton are associated (or correlated) with NOV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NOV Inc has no effect on the direction of Halliburton i.e., Halliburton and NOV go up and down completely randomly.

Pair Corralation between Halliburton and NOV

Assuming the 90 days trading horizon Halliburton is expected to under-perform the NOV. In addition to that, Halliburton is 1.11 times more volatile than NOV Inc. It trades about -0.61 of its total potential returns per unit of risk. NOV Inc is currently generating about -0.54 per unit of volatility. If you would invest  1,557  in NOV Inc on September 24, 2024 and sell it today you would lose (219.00) from holding NOV Inc or give up 14.07% of portfolio value over 90 days.

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

Halliburton  vs.  NOV Inc

Halliburton

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Halliburton has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable essential indicators, Halliburton is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

NOV Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NOV Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Halliburton and NOV

The main advantage of trading using opposite Halliburton and NOV positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Halliburton position performs unexpectedly, NOV 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 NOV will offset losses from the drop in NOV's long position.

The idea behind Halliburton and NOV Inc 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.