Correlation Between NOV and Solaris Energy

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

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

Diversification Opportunities for NOV and Solaris Energy

-0.5

Correlation Coefficient

NOV  Solaris Energy

Very good diversification

The 3 months correlation between NOV and Solaris is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding NOV Inc and Solaris Energy Infrastructure, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solaris Energy Infra 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 Solaris Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solaris Energy Infra has no effect on the direction of NOV i.e., NOV and Solaris Energy go up and down completely randomly.

Pair Corralation between NOV and Solaris Energy

Considering the 90-day investment horizon NOV Inc is expected to under-perform the Solaris Energy. But the stock apears to be less risky and, when comparing its historical volatility, NOV Inc is 3.46 times less risky than Solaris Energy. The stock trades about -0.09 of its potential returns per unit of risk. The Solaris Energy Infrastructure, is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  2,321  in Solaris Energy Infrastructure, on October 23, 2024 and sell it today you would earn a total of  811.00  from holding Solaris Energy Infrastructure, or generate 34.94% return on investment over 90 days.

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

NOV Inc  vs.  Solaris Energy Infrastructure,

NOV Inc

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NOV Inc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

Solaris Energy Infra

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Solaris Energy Infrastructure, are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile technical and fundamental indicators, Solaris Energy demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NOV and Solaris Energy

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

The idea behind NOV Inc and Solaris Energy Infrastructure, 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.