Correlation Between NOV and BHP

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

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

Diversification Opportunities for NOV and BHP

0.08

Correlation Coefficient

NOV  BHP

Significant diversification

The 3 months correlation between NOV and BHP is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding NOV Inc and BHP Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BHP Group 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 BHP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BHP Group has no effect on the direction of NOV i.e., NOV and BHP go up and down completely randomly.

Pair Corralation between NOV and BHP

If you would invest  32,092  in NOV Inc on September 23, 2024 and sell it today you would earn a total of  152.00  from holding NOV Inc or generate 0.47% return on investment over 90 days.

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

NOV Inc  vs.  BHP Group

NOV Inc

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NOV Inc are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, NOV is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

BHP Group

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BHP Group are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, BHP may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with NOV and BHP

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

The idea behind NOV Inc and BHP Group 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.