Correlation Between Nabors Energy and Aker Solutions

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

By analyzing existing cross correlation between Nabors Energy Transition and Aker Solutions ASA, you can compare the effects of market volatilities on Nabors Energy and Aker Solutions 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 Energy with a short position of Aker Solutions. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nabors Energy and Aker Solutions.

Diversification Opportunities for Nabors Energy and Aker Solutions

0.94

Correlation Coefficient

Nabors Energy  Aker Solutions

Almost no diversification

The 3 months correlation between Nabors and Aker is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Nabors Energy Transition and Aker Solutions ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aker Solutions ASA and Nabors Energy 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 Energy Transition are associated (or correlated) with Aker Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aker Solutions ASA has no effect on the direction of Nabors Energy i.e., Nabors Energy and Aker Solutions go up and down completely randomly.

Pair Corralation between Nabors Energy and Aker Solutions

Assuming the 90 days horizon Nabors Energy is expected to generate 35.2 times less return on investment than Aker Solutions. But when comparing it to its historical volatility, Nabors Energy Transition is 59.81 times less risky than Aker Solutions. It trades about 0.39 of its potential returns per unit of risk. Aker Solutions ASA is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  539.00  in Aker Solutions ASA on September 23, 2024 and sell it today you would earn a total of  461.00  from holding Aker Solutions ASA or generate 85.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Nabors Energy Transition  vs.  Aker Solutions ASA

Nabors Energy Transition

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Nabors Energy Transition are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental indicators, Nabors Energy is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Aker Solutions ASA

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aker Solutions ASA are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Aker Solutions showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nabors Energy and Aker Solutions

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

The idea behind Nabors Energy Transition and Aker Solutions ASA 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.