Correlation Between NOV and Vanguard World

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

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

Diversification Opportunities for NOV and Vanguard World

-0.8

Correlation Coefficient

NOV  Vanguard World

Pay attention - limited upside

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

Pair Corralation between NOV and Vanguard World

Assuming the 90 days trading horizon NOV Inc is expected to generate 0.07 times more return on investment than Vanguard World. However, NOV Inc is 15.19 times less risky than Vanguard World. It trades about 0.13 of its potential returns per unit of risk. Vanguard World is currently generating about -0.02 per unit of risk. If you would invest  32,092  in NOV Inc on October 5, 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 Against
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

NOV Inc  vs.  Vanguard World

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.

Vanguard World

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with NOV and Vanguard World

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

The idea behind NOV Inc and Vanguard World 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.