Correlation Between Nabors Industries and Sinopec Oilfield

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

By analyzing existing cross correlation between Nabors Industries and Sinopec Oilfield Service, you can compare the effects of market volatilities on Nabors Industries and Sinopec Oilfield 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 Sinopec Oilfield. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nabors Industries and Sinopec Oilfield.

Diversification Opportunities for Nabors Industries and Sinopec Oilfield

0.46

Correlation Coefficient

Nabors Industries  Sinopec Oilfield

Very weak diversification

The 3 months correlation between Nabors and Sinopec is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Nabors Industries and Sinopec Oilfield Service in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sinopec Oilfield Service 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 Sinopec Oilfield. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sinopec Oilfield Service has no effect on the direction of Nabors Industries i.e., Nabors Industries and Sinopec Oilfield go up and down completely randomly.

Pair Corralation between Nabors Industries and Sinopec Oilfield

Assuming the 90 days trading horizon Nabors Industries is expected to under-perform the Sinopec Oilfield. In addition to that, Nabors Industries is 1.72 times more volatile than Sinopec Oilfield Service. It trades about -0.06 of its total potential returns per unit of risk. Sinopec Oilfield Service is currently generating about 0.01 per unit of volatility. If you would invest  7.05  in Sinopec Oilfield Service on December 30, 2024 and sell it today you would earn a total of  0.00  from holding Sinopec Oilfield Service or generate 0.0% return on investment over 90 days.

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

Nabors Industries  vs.  Sinopec Oilfield Service

Nabors Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nabors Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's forward indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Sinopec Oilfield Service

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sinopec Oilfield Service are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Sinopec Oilfield is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Nabors Industries and Sinopec Oilfield

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

The idea behind Nabors Industries and Sinopec Oilfield Service 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.