Correlation Between Nabors Industries and PRECISION DRILLING

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

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

Diversification Opportunities for Nabors Industries and PRECISION DRILLING

-0.05

Correlation Coefficient

Nabors Industries  PRECISION DRILLING

Good diversification

The 3 months correlation between Nabors and PRECISION is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Nabors Industries and PRECISION DRILLING P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PRECISION DRILLING and Nabors Industries 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 Nabors Industries are associated (or correlated) with PRECISION DRILLING. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PRECISION DRILLING has no effect on the direction of Nabors Industries i.e., Nabors Industries and PRECISION DRILLING go up and down completely randomly.

Pair Corralation between Nabors Industries and PRECISION DRILLING

Assuming the 90 days trading horizon Nabors Industries is expected to under-perform the PRECISION DRILLING. In addition to that, Nabors Industries is 1.41 times more volatile than PRECISION DRILLING P. It trades about -0.01 of its total potential returns per unit of risk. PRECISION DRILLING P is currently generating about 0.05 per unit of volatility. If you would invest  4,220  in PRECISION DRILLING P on September 1, 2024 and sell it today you would earn a total of  1,630  from holding PRECISION DRILLING P or generate 38.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.74%
Values	Daily Returns

Nabors Industries  vs.  PRECISION DRILLING P

Nabors Industries

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Nabors Industries are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward indicators, Nabors Industries may actually be approaching a critical reversion point that can send shares even higher in December 2024.

PRECISION DRILLING

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PRECISION DRILLING P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's technical and fundamental 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 Nabors Industries and PRECISION DRILLING

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

The idea behind Nabors Industries and PRECISION DRILLING P 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.