Correlation Between KLX Energy and NOV

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

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

Diversification Opportunities for KLX Energy and NOV

0.15

Correlation Coefficient

KLX Energy  NOV

Average diversification

The 3 months correlation between KLX and NOV is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding KLX Energy Services and NOV Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NOV Inc and KLX Energy 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 KLX Energy Services 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 KLX Energy i.e., KLX Energy and NOV go up and down completely randomly.

Pair Corralation between KLX Energy and NOV

Given the investment horizon of 90 days KLX Energy Services is expected to under-perform the NOV. In addition to that, KLX Energy is 2.56 times more volatile than NOV Inc. It trades about -0.04 of its total potential returns per unit of risk. NOV Inc is currently generating about 0.05 per unit of volatility. If you would invest  1,435  in NOV Inc on December 26, 2024 and sell it today you would earn a total of  77.00  from holding NOV Inc or generate 5.37% return on investment over 90 days.

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

KLX Energy Services  vs.  NOV Inc

KLX Energy Services

Risk-Adjusted Performance

Very Weak

Over the last 90 days KLX Energy Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

NOV Inc

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NOV Inc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, NOV may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with KLX Energy and NOV

The main advantage of trading using opposite KLX Energy and NOV positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KLX Energy 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 KLX Energy Services 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.