Correlation Between Nabors Energy and Bt Brands

Can any of the company-specific risk be diversified away by investing in both Nabors Energy and Bt Brands 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 Bt Brands 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 Bt Brands, you can compare the effects of market volatilities on Nabors Energy and Bt Brands 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 Bt Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nabors Energy and Bt Brands.

Diversification Opportunities for Nabors Energy and Bt Brands

-0.56

Correlation Coefficient

Nabors Energy  Bt Brands

Excellent diversification

The 3 months correlation between Nabors and BTBD is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Nabors Energy Transition and Bt Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bt Brands 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 Bt Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bt Brands has no effect on the direction of Nabors Energy i.e., Nabors Energy and Bt Brands go up and down completely randomly.

Pair Corralation between Nabors Energy and Bt Brands

Assuming the 90 days horizon Nabors Energy is expected to generate 5.34 times less return on investment than Bt Brands. But when comparing it to its historical volatility, Nabors Energy Transition is 23.81 times less risky than Bt Brands. It trades about 0.09 of its potential returns per unit of risk. Bt Brands is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  182.00  in Bt Brands on October 4, 2024 and sell it today you would lose (38.00) from holding Bt Brands or give up 20.88% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	75.2%
Values	Daily Returns

Nabors Energy Transition  vs.  Bt Brands

Nabors Energy Transition

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nabors Energy Transition are ranked lower than 8 (%) 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 latest stock price uproar, may contribute to short-horizon losses for the private investors.

Bt Brands

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bt Brands has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental drivers remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Nabors Energy and Bt Brands

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

The idea behind Nabors Energy Transition and Bt Brands 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.