Correlation Between Nabors Energy and JD Sports

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

Diversification Opportunities for Nabors Energy and JD Sports

-0.8

Correlation Coefficient

Nabors Energy  JD Sports

Pay attention - limited upside

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

Pair Corralation between Nabors Energy and JD Sports

Assuming the 90 days horizon Nabors Energy Transition is expected to generate 2.99 times more return on investment than JD Sports. However, Nabors Energy is 2.99 times more volatile than JD Sports Fashion. It trades about 0.07 of its potential returns per unit of risk. JD Sports Fashion is currently generating about -0.02 per unit of risk. If you would invest  13.00  in Nabors Energy Transition on October 24, 2024 and sell it today you would earn a total of  3.00  from holding Nabors Energy Transition or generate 23.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	66.26%
Values	Daily Returns

Nabors Energy Transition  vs.  JD Sports Fashion

Nabors Energy Transition

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days Nabors Energy Transition has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly abnormal fundamental indicators, Nabors Energy showed solid returns over the last few months and may actually be approaching a breakup point.

JD Sports Fashion

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days JD Sports Fashion has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Nabors Energy and JD Sports

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

The idea behind Nabors Energy Transition and JD Sports Fashion 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.