Correlation Between Nabors Energy and Vita Coco

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

Diversification Opportunities for Nabors Energy and Vita Coco

0.68

Correlation Coefficient

Nabors Energy  Vita Coco

Poor diversification

The 3 months correlation between Nabors and Vita is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Nabors Energy Transition and Vita Coco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vita Coco 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 Vita Coco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vita Coco has no effect on the direction of Nabors Energy i.e., Nabors Energy and Vita Coco go up and down completely randomly.

Pair Corralation between Nabors Energy and Vita Coco

Assuming the 90 days horizon Nabors Energy Transition is expected to generate 3.83 times more return on investment than Vita Coco. However, Nabors Energy is 3.83 times more volatile than Vita Coco. It trades about 0.05 of its potential returns per unit of risk. Vita Coco is currently generating about 0.08 per unit of risk. If you would invest  23.00  in Nabors Energy Transition on October 10, 2024 and sell it today you would lose (5.00) from holding Nabors Energy Transition or give up 21.74% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	46.37%
Values	Daily Returns

Nabors Energy Transition  vs.  Vita Coco

Nabors Energy Transition

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nabors Energy Transition are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating fundamental indicators, Nabors Energy showed solid returns over the last few months and may actually be approaching a breakup point.

Vita Coco

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vita Coco are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal fundamental indicators, Vita Coco displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nabors Energy and Vita Coco

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

The idea behind Nabors Energy Transition and Vita Coco 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.