Correlation Between Nabors Energy and Investec

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

Diversification Opportunities for Nabors Energy and Investec

-0.5

Correlation Coefficient

Nabors Energy  Investec

Very good diversification

The 3 months correlation between Nabors and Investec is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Nabors Energy Transition and Investec Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Investec ADR 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 Investec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Investec ADR has no effect on the direction of Nabors Energy i.e., Nabors Energy and Investec go up and down completely randomly.

Pair Corralation between Nabors Energy and Investec

Assuming the 90 days horizon Nabors Energy is expected to generate 1.08 times less return on investment than Investec. But when comparing it to its historical volatility, Nabors Energy Transition is 31.35 times less risky than Investec. It trades about 0.39 of its potential returns per unit of risk. Investec Ltd ADR is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,459  in Investec Ltd ADR on September 23, 2024 and sell it today you would lose (117.00) from holding Investec Ltd ADR or give up 8.02% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Nabors Energy Transition  vs.  Investec Ltd ADR

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.

Investec ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Investec Ltd ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, Investec is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Nabors Energy and Investec

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

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