Correlation Between Origin Materials and Nabors Industries

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

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

Diversification Opportunities for Origin Materials and Nabors Industries

0.55

Correlation Coefficient

Origin Materials  Nabors Industries

Very weak diversification

The 3 months correlation between Origin and Nabors is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Origin Materials and Nabors Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nabors Industries and Origin Materials 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 Origin Materials 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 Origin Materials i.e., Origin Materials and Nabors Industries go up and down completely randomly.

Pair Corralation between Origin Materials and Nabors Industries

Given the investment horizon of 90 days Origin Materials is expected to generate 0.59 times more return on investment than Nabors Industries. However, Origin Materials is 1.71 times less risky than Nabors Industries. It trades about 0.06 of its potential returns per unit of risk. Nabors Industries is currently generating about -0.01 per unit of risk. If you would invest  121.00  in Origin Materials on October 6, 2024 and sell it today you would earn a total of  4.00  from holding Origin Materials or generate 3.31% return on investment over 90 days.

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

Origin Materials  vs.  Nabors Industries

Origin Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Origin Materials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

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 fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Origin Materials and Nabors Industries

The main advantage of trading using opposite Origin Materials and Nabors Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Origin Materials 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 Origin Materials 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.