Correlation Between Nabors Industries and Relx PLC

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

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

Diversification Opportunities for Nabors Industries and Relx PLC

0.26

Correlation Coefficient

Nabors Industries  Relx PLC

Modest diversification

The 3 months correlation between Nabors and Relx is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Nabors Industries and Relx PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Relx PLC ADR 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 Relx PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Relx PLC ADR has no effect on the direction of Nabors Industries i.e., Nabors Industries and Relx PLC go up and down completely randomly.

Pair Corralation between Nabors Industries and Relx PLC

Assuming the 90 days horizon Nabors Industries is expected to generate 12.11 times more return on investment than Relx PLC. However, Nabors Industries is 12.11 times more volatile than Relx PLC ADR. It trades about 0.2 of its potential returns per unit of risk. Relx PLC ADR is currently generating about 0.35 per unit of risk. If you would invest  370.00  in Nabors Industries on October 22, 2024 and sell it today you would earn a total of  126.00  from holding Nabors Industries or generate 34.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	94.74%
Values	Daily Returns

Nabors Industries  vs.  Relx PLC ADR

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 nearly stable basic indicators, Nabors Industries is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Relx PLC ADR

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Relx PLC ADR are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong essential indicators, Relx PLC is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Nabors Industries and Relx PLC

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

The idea behind Nabors Industries and Relx PLC ADR 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.