Correlation Between Nabors Industries and Entravision Communications

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

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

Diversification Opportunities for Nabors Industries and Entravision Communications

-0.09

Correlation Coefficient

Nabors Industries  Entravision Communications

Good diversification

The 3 months correlation between Nabors and Entravision is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Nabors Industries and Entravision Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Entravision Communications 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 Entravision Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Entravision Communications has no effect on the direction of Nabors Industries i.e., Nabors Industries and Entravision Communications go up and down completely randomly.

Pair Corralation between Nabors Industries and Entravision Communications

Assuming the 90 days horizon Nabors Industries is expected to under-perform the Entravision Communications. In addition to that, Nabors Industries is 1.79 times more volatile than Entravision Communications. It trades about -0.36 of its total potential returns per unit of risk. Entravision Communications is currently generating about 0.04 per unit of volatility. If you would invest  242.00  in Entravision Communications on September 22, 2024 and sell it today you would earn a total of  4.00  from holding Entravision Communications or generate 1.65% return on investment over 90 days.

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

Nabors Industries  vs.  Entravision Communications

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. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Entravision Communications

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Entravision Communications are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Entravision Communications exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nabors Industries and Entravision Communications

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

The idea behind Nabors Industries and Entravision Communications 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.

Check out your portfolio center.

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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.