Correlation Between Nabors Industries and Aker BP

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

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

Diversification Opportunities for Nabors Industries and Aker BP

0.49

Correlation Coefficient

Nabors Industries  Aker BP

Very weak diversification

The 3 months correlation between Nabors and Aker is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Nabors Industries and Aker BP ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aker BP ASA 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 Aker BP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aker BP ASA has no effect on the direction of Nabors Industries i.e., Nabors Industries and Aker BP go up and down completely randomly.

Pair Corralation between Nabors Industries and Aker BP

Considering the 90-day investment horizon Nabors Industries is expected to under-perform the Aker BP. In addition to that, Nabors Industries is 1.02 times more volatile than Aker BP ASA. It trades about -0.02 of its total potential returns per unit of risk. Aker BP ASA is currently generating about 0.01 per unit of volatility. If you would invest  1,067  in Aker BP ASA on October 5, 2024 and sell it today you would lose (94.00) from holding Aker BP ASA or give up 8.81% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.78%
Values	Daily Returns

Nabors Industries  vs.  Aker BP ASA

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.

Aker BP ASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aker BP ASA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Nabors Industries and Aker BP

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

The idea behind Nabors Industries and Aker BP ASA 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.

Check out your portfolio center.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.