Correlation Between Nabors Industries and Transocean

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

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

Diversification Opportunities for Nabors Industries and Transocean

0.94

Correlation Coefficient

Nabors Industries  Transocean

Almost no diversification

The 3 months correlation between Nabors and Transocean is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Nabors Industries and Transocean in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transocean 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 Transocean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transocean has no effect on the direction of Nabors Industries i.e., Nabors Industries and Transocean go up and down completely randomly.

Pair Corralation between Nabors Industries and Transocean

Considering the 90-day investment horizon Nabors Industries is expected to under-perform the Transocean. In addition to that, Nabors Industries is 1.25 times more volatile than Transocean. It trades about -0.26 of its total potential returns per unit of risk. Transocean is currently generating about -0.19 per unit of volatility. If you would invest  440.00  in Transocean on November 28, 2024 and sell it today you would lose (121.00) from holding Transocean or give up 27.5% of portfolio value over 90 days.

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

Nabors Industries  vs.  Transocean

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. 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 March 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Transocean

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Nabors Industries and Transocean

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

The idea behind Nabors Industries and Transocean 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.