Correlation Between Park Ohio and Nabors Industries

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

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

Diversification Opportunities for Park Ohio and Nabors Industries

0.53

Correlation Coefficient

Park Ohio  Nabors Industries

Very weak diversification

The 3 months correlation between Park and Nabors is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Park Ohio Holdings and Nabors Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nabors Industries and Park Ohio 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 Park Ohio Holdings 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 Park Ohio i.e., Park Ohio and Nabors Industries go up and down completely randomly.

Pair Corralation between Park Ohio and Nabors Industries

Given the investment horizon of 90 days Park Ohio Holdings is expected to generate 0.9 times more return on investment than Nabors Industries. However, Park Ohio Holdings is 1.11 times less risky than Nabors Industries. It trades about -0.59 of its potential returns per unit of risk. Nabors Industries is currently generating about -0.8 per unit of risk. If you would invest  3,313  in Park Ohio Holdings on September 25, 2024 and sell it today you would lose (687.00) from holding Park Ohio Holdings or give up 20.74% of portfolio value over 90 days.

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

Park Ohio Holdings  vs.  Nabors Industries

Park Ohio Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Park Ohio Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

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. Even with weak performance in the last few months, the Stock's fundamental drivers remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Park Ohio and Nabors Industries

The main advantage of trading using opposite Park Ohio and Nabors Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Park Ohio 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 Park Ohio Holdings 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.