Correlation Between Nabors Industries and GENERAL

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

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

Diversification Opportunities for Nabors Industries and GENERAL

0.2

Correlation Coefficient

Nabors Industries  GENERAL

Modest diversification

The 3 months correlation between Nabors and GENERAL is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Nabors Industries and GENERAL ELEC CAP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GENERAL ELEC CAP 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 GENERAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GENERAL ELEC CAP has no effect on the direction of Nabors Industries i.e., Nabors Industries and GENERAL go up and down completely randomly.

Pair Corralation between Nabors Industries and GENERAL

Considering the 90-day investment horizon Nabors Industries is expected to under-perform the GENERAL. In addition to that, Nabors Industries is 1.21 times more volatile than GENERAL ELEC CAP. It trades about -0.05 of its total potential returns per unit of risk. GENERAL ELEC CAP is currently generating about 0.07 per unit of volatility. If you would invest  9,438  in GENERAL ELEC CAP on October 26, 2024 and sell it today you would earn a total of  366.00  from holding GENERAL ELEC CAP or generate 3.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	45.76%
Values	Daily Returns

Nabors Industries  vs.  GENERAL ELEC CAP

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.

GENERAL ELEC CAP

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in GENERAL ELEC CAP are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent basic indicators, GENERAL may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Nabors Industries and GENERAL

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

The idea behind Nabors Industries and GENERAL ELEC CAP 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.