Correlation Between Nabors Industries and Rocky Mountain

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

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

Diversification Opportunities for Nabors Industries and Rocky Mountain

0.25

Correlation Coefficient

Nabors Industries  Rocky Mountain

Modest diversification

The 3 months correlation between Nabors and Rocky is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Nabors Industries and Rocky Mountain Chocolate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rocky Mountain Chocolate 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 Rocky Mountain. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rocky Mountain Chocolate has no effect on the direction of Nabors Industries i.e., Nabors Industries and Rocky Mountain go up and down completely randomly.

Pair Corralation between Nabors Industries and Rocky Mountain

Considering the 90-day investment horizon Nabors Industries is expected to generate 0.49 times more return on investment than Rocky Mountain. However, Nabors Industries is 2.05 times less risky than Rocky Mountain. It trades about 0.43 of its potential returns per unit of risk. Rocky Mountain Chocolate is currently generating about -0.12 per unit of risk. If you would invest  5,107  in Nabors Industries on October 26, 2024 and sell it today you would earn a total of  1,341  from holding Nabors Industries or generate 26.26% return on investment over 90 days.

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

Nabors Industries  vs.  Rocky Mountain Chocolate

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 latest weak performance, the Stock's fundamental drivers remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Rocky Mountain Chocolate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rocky Mountain Chocolate 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 fundamental indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Nabors Industries and Rocky Mountain

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

The idea behind Nabors Industries and Rocky Mountain Chocolate 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.