Correlation Between NOV and Amazon

Can any of the company-specific risk be diversified away by investing in both NOV and Amazon 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 NOV and Amazon into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between NOV Inc and Amazon Inc, you can compare the effects of market volatilities on NOV and Amazon 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 NOV with a short position of Amazon. Check out your portfolio center. Please also check ongoing floating volatility patterns of NOV and Amazon.

Diversification Opportunities for NOV and Amazon

0.6

Correlation Coefficient

NOV  Amazon

Poor diversification

The 3 months correlation between NOV and Amazon is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding NOV Inc and Amazon Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amazon Inc and NOV 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 NOV Inc are associated (or correlated) with Amazon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amazon Inc has no effect on the direction of NOV i.e., NOV and Amazon go up and down completely randomly.

Pair Corralation between NOV and Amazon

Assuming the 90 days trading horizon NOV Inc is expected to generate 0.7 times more return on investment than Amazon. However, NOV Inc is 1.43 times less risky than Amazon. It trades about -0.14 of its potential returns per unit of risk. Amazon Inc is currently generating about -0.13 per unit of risk. If you would invest  32,078  in NOV Inc on December 20, 2024 and sell it today you would lose (3,078) from holding NOV Inc or give up 9.6% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

NOV Inc  vs.  Amazon Inc

NOV Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days NOV Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Amazon Inc

Risk-Adjusted Performance

Very Weak

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

Pair Trading with NOV and Amazon

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

The idea behind NOV Inc and Amazon Inc 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.