Correlation Between Nabors Industries and Sunlands Technology

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

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

Diversification Opportunities for Nabors Industries and Sunlands Technology

0.56

Correlation Coefficient

Nabors Industries  Sunlands Technology

Very weak diversification

The 3 months correlation between Nabors and Sunlands is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Nabors Industries and Sunlands Technology Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sunlands Technology 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 Sunlands Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sunlands Technology has no effect on the direction of Nabors Industries i.e., Nabors Industries and Sunlands Technology go up and down completely randomly.

Pair Corralation between Nabors Industries and Sunlands Technology

Considering the 90-day investment horizon Nabors Industries is expected to generate 0.84 times more return on investment than Sunlands Technology. However, Nabors Industries is 1.19 times less risky than Sunlands Technology. It trades about -0.13 of its potential returns per unit of risk. Sunlands Technology Group is currently generating about -0.15 per unit of risk. If you would invest  6,777  in Nabors Industries on October 8, 2024 and sell it today you would lose (627.00) from holding Nabors Industries or give up 9.25% of portfolio value over 90 days.

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

Nabors Industries  vs.  Sunlands Technology Group

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.

Sunlands Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sunlands Technology Group 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 basic 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 Sunlands Technology

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

The idea behind Nabors Industries and Sunlands Technology Group 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.