Correlation Between NOV and Oil States

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

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

Diversification Opportunities for NOV and Oil States

0.28

Correlation Coefficient

NOV  Oil States

Modest diversification

The 3 months correlation between NOV and Oil is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding NOV Inc and Oil States International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oil States International 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 Oil States. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oil States International has no effect on the direction of NOV i.e., NOV and Oil States go up and down completely randomly.

Pair Corralation between NOV and Oil States

Considering the 90-day investment horizon NOV Inc is expected to generate 0.65 times more return on investment than Oil States. However, NOV Inc is 1.53 times less risky than Oil States. It trades about -0.03 of its potential returns per unit of risk. Oil States International is currently generating about -0.03 per unit of risk. If you would invest  1,890  in NOV Inc on September 15, 2024 and sell it today you would lose (393.00) from holding NOV Inc or give up 20.79% of portfolio value over 90 days.

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

NOV Inc  vs.  Oil States International

NOV Inc

Risk-Adjusted Performance

0 of 100

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 fairly stable basic indicators, NOV is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Oil States International

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Oil States International are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent forward indicators, Oil States may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with NOV and Oil States

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

The idea behind NOV Inc and Oil States International 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.