Correlation Between Tidewater and NOV

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

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

Diversification Opportunities for Tidewater and NOV

0.3

Correlation Coefficient

Tidewater  NOV

Weak diversification

The 3 months correlation between Tidewater and NOV is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Tidewater and NOV Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NOV Inc and Tidewater 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 Tidewater are associated (or correlated) with NOV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NOV Inc has no effect on the direction of Tidewater i.e., Tidewater and NOV go up and down completely randomly.

Pair Corralation between Tidewater and NOV

Considering the 90-day investment horizon Tidewater is expected to under-perform the NOV. In addition to that, Tidewater is 1.16 times more volatile than NOV Inc. It trades about -0.1 of its total potential returns per unit of risk. NOV Inc is currently generating about 0.06 per unit of volatility. If you would invest  1,443  in NOV Inc on December 28, 2024 and sell it today you would earn a total of  100.00  from holding NOV Inc or generate 6.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

Tidewater  vs.  NOV Inc

Tidewater

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tidewater has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's fundamental indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

NOV Inc

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NOV Inc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, NOV may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Tidewater and NOV

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

The idea behind Tidewater and NOV Inc 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.