Correlation Between Nabors Energy and PHX Energy

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

Diversification Opportunities for Nabors Energy and PHX Energy

-0.8

Correlation Coefficient

Nabors Energy  PHX Energy

Pay attention - limited upside

The 3 months correlation between Nabors and PHX is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Nabors Energy Transition and PHX Energy Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PHX Energy Services 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 PHX Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PHX Energy Services has no effect on the direction of Nabors Energy i.e., Nabors Energy and PHX Energy go up and down completely randomly.

Pair Corralation between Nabors Energy and PHX Energy

Assuming the 90 days horizon Nabors Energy Transition is expected to generate 0.16 times more return on investment than PHX Energy. However, Nabors Energy Transition is 6.44 times less risky than PHX Energy. It trades about 0.14 of its potential returns per unit of risk. PHX Energy Services is currently generating about -0.07 per unit of risk. If you would invest  1,066  in Nabors Energy Transition on October 12, 2024 and sell it today you would earn a total of  18.00  from holding Nabors Energy Transition or generate 1.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Nabors Energy Transition  vs.  PHX Energy Services

Nabors Energy Transition

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nabors Energy Transition are ranked lower than 9 (%) 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 current stock price uproar, may contribute to short-horizon losses for the private investors.

PHX Energy Services

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PHX Energy Services has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's technical indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Nabors Energy and PHX Energy

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

The idea behind Nabors Energy Transition and PHX Energy Services 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.