Correlation Between Nabors Industries and NL Industries

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

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

Diversification Opportunities for Nabors Industries and NL Industries

0.63

Correlation Coefficient

Nabors Industries  NL Industries

Poor diversification

The 3 months correlation between Nabors and NL Industries is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Nabors Industries and NL Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NL Industries 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 NL Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NL Industries has no effect on the direction of Nabors Industries i.e., Nabors Industries and NL Industries go up and down completely randomly.

Pair Corralation between Nabors Industries and NL Industries

Considering the 90-day investment horizon Nabors Industries is expected to generate 3.16 times less return on investment than NL Industries. In addition to that, Nabors Industries is 1.27 times more volatile than NL Industries. It trades about 0.04 of its total potential returns per unit of risk. NL Industries is currently generating about 0.16 per unit of volatility. If you would invest  628.00  in NL Industries on September 5, 2024 and sell it today you would earn a total of  193.00  from holding NL Industries or generate 30.73% return on investment over 90 days.

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

Nabors Industries  vs.  NL Industries

Nabors Industries

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nabors Industries are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak fundamental drivers, Nabors Industries may actually be approaching a critical reversion point that can send shares even higher in January 2025.

NL Industries

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NL Industries are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite quite fragile essential indicators, NL Industries disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nabors Industries and NL Industries

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

The idea behind Nabors Industries and NL Industries 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 CEOs Directory module to screen CEOs from public companies around the world.