Correlation Between Nabors Energy and Codexis

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

Diversification Opportunities for Nabors Energy and Codexis

0.55

Correlation Coefficient

Nabors Energy  Codexis

Very weak diversification

The 3 months correlation between Nabors and Codexis is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Nabors Energy Transition and Codexis in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Codexis 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 Codexis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Codexis has no effect on the direction of Nabors Energy i.e., Nabors Energy and Codexis go up and down completely randomly.

Pair Corralation between Nabors Energy and Codexis

Assuming the 90 days horizon Nabors Energy is expected to generate 4.13 times less return on investment than Codexis. But when comparing it to its historical volatility, Nabors Energy Transition is 22.64 times less risky than Codexis. It trades about 0.09 of its potential returns per unit of risk. Codexis is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  628.00  in Codexis on October 4, 2024 and sell it today you would lose (151.00) from holding Codexis or give up 24.04% of portfolio value over 90 days.

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

Nabors Energy Transition  vs.  Codexis

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.

Codexis

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Codexis are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Codexis unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nabors Energy and Codexis

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

The idea behind Nabors Energy Transition and Codexis 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.