Correlation Between Nabors Industries and Warner Music

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

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

Diversification Opportunities for Nabors Industries and Warner Music

0.4

Correlation Coefficient

Nabors Industries  Warner Music

Very weak diversification

The 3 months correlation between Nabors and Warner is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Nabors Industries and Warner Music Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Warner Music Group 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 Warner Music. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Warner Music Group has no effect on the direction of Nabors Industries i.e., Nabors Industries and Warner Music go up and down completely randomly.

Pair Corralation between Nabors Industries and Warner Music

Considering the 90-day investment horizon Nabors Industries is expected to under-perform the Warner Music. But the stock apears to be less risky and, when comparing its historical volatility, Nabors Industries is 1.04 times less risky than Warner Music. The stock trades about -0.29 of its potential returns per unit of risk. The Warner Music Group is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  3,315  in Warner Music Group on September 15, 2024 and sell it today you would lose (41.00) from holding Warner Music Group or give up 1.24% 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.  Warner Music Group

Nabors Industries

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Nabors Industries are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable fundamental drivers, Nabors Industries is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Warner Music Group

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Warner Music Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak primary indicators, Warner Music may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Nabors Industries and Warner Music

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

The idea behind Nabors Industries and Warner Music 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.