Correlation Between Obayashi and Nabors Industries

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

By analyzing existing cross correlation between Obayashi and Nabors Industries, you can compare the effects of market volatilities on Obayashi and Nabors Industries 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 Obayashi with a short position of Nabors Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Obayashi and Nabors Industries.

Diversification Opportunities for Obayashi and Nabors Industries

-0.63

Correlation Coefficient

Obayashi  Nabors Industries

Excellent diversification

The 3 months correlation between Obayashi and Nabors is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Obayashi and Nabors Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nabors Industries and Obayashi 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 Obayashi are associated (or correlated) with Nabors Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nabors Industries has no effect on the direction of Obayashi i.e., Obayashi and Nabors Industries go up and down completely randomly.

Pair Corralation between Obayashi and Nabors Industries

Assuming the 90 days horizon Obayashi is expected to generate 0.38 times more return on investment than Nabors Industries. However, Obayashi is 2.65 times less risky than Nabors Industries. It trades about -0.02 of its potential returns per unit of risk. Nabors Industries is currently generating about -0.36 per unit of risk. If you would invest  1,336  in Obayashi on September 22, 2024 and sell it today you would lose (16.00) from holding Obayashi or give up 1.2% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Obayashi  vs.  Nabors Industries

Obayashi

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Obayashi are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental indicators, Obayashi reported solid returns over the last few months and may actually be approaching a breakup point.

Nabors Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nabors Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Obayashi and Nabors Industries

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

The idea behind Obayashi and Nabors Industries 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.