Correlation Between NOV and PulteGroup

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

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

Diversification Opportunities for NOV and PulteGroup

0.47

Correlation Coefficient

NOV  PulteGroup

Very weak diversification

The 3 months correlation between NOV and PulteGroup is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding NOV Inc and PulteGroup in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PulteGroup 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 PulteGroup. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PulteGroup has no effect on the direction of NOV i.e., NOV and PulteGroup go up and down completely randomly.

Pair Corralation between NOV and PulteGroup

Assuming the 90 days trading horizon NOV Inc is expected to under-perform the PulteGroup. But the stock apears to be less risky and, when comparing its historical volatility, NOV Inc is 1.69 times less risky than PulteGroup. The stock trades about -0.14 of its potential returns per unit of risk. The PulteGroup is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  222,828  in PulteGroup on December 27, 2024 and sell it today you would lose (12,828) from holding PulteGroup or give up 5.76% of portfolio value over 90 days.

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

NOV Inc  vs.  PulteGroup

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.

PulteGroup

Risk-Adjusted Performance

Very Weak

Over the last 90 days PulteGroup has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong primary indicators, PulteGroup is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with NOV and PulteGroup

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

The idea behind NOV Inc and PulteGroup 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.

Check out your portfolio center.

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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.