Correlation Between Nabors Industries and Tandem Diabetes

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

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

Diversification Opportunities for Nabors Industries and Tandem Diabetes

-0.17

Correlation Coefficient

Nabors Industries  Tandem Diabetes

Good diversification

The 3 months correlation between Nabors and Tandem is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Nabors Industries and Tandem Diabetes Care in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tandem Diabetes Care 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 Tandem Diabetes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tandem Diabetes Care has no effect on the direction of Nabors Industries i.e., Nabors Industries and Tandem Diabetes go up and down completely randomly.

Pair Corralation between Nabors Industries and Tandem Diabetes

Assuming the 90 days horizon Nabors Industries is expected to under-perform the Tandem Diabetes. In addition to that, Nabors Industries is 1.54 times more volatile than Tandem Diabetes Care. It trades about -0.04 of its total potential returns per unit of risk. Tandem Diabetes Care is currently generating about 0.01 per unit of volatility. If you would invest  4,125  in Tandem Diabetes Care on October 4, 2024 and sell it today you would lose (546.00) from holding Tandem Diabetes Care or give up 13.24% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Nabors Industries  vs.  Tandem Diabetes Care

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 conflicting 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.

Tandem Diabetes Care

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tandem Diabetes Care has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Nabors Industries and Tandem Diabetes

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

The idea behind Nabors Industries and Tandem Diabetes Care 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.