Correlation Between 191216CU2 and Nabors Industries

Can any of the company-specific risk be diversified away by investing in both 191216CU2 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 191216CU2 and Nabors Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between COCA COLA CO and Nabors Industries, you can compare the effects of market volatilities on 191216CU2 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 191216CU2 with a short position of Nabors Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of 191216CU2 and Nabors Industries.

Diversification Opportunities for 191216CU2 and Nabors Industries

0.77

Correlation Coefficient

191216CU2  Nabors Industries

Poor diversification

The 3 months correlation between 191216CU2 and Nabors is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding COCA COLA CO and Nabors Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nabors Industries and 191216CU2 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 COCA COLA CO 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 191216CU2 i.e., 191216CU2 and Nabors Industries go up and down completely randomly.

Pair Corralation between 191216CU2 and Nabors Industries

Assuming the 90 days trading horizon COCA COLA CO is expected to under-perform the Nabors Industries. But the bond apears to be less risky and, when comparing its historical volatility, COCA COLA CO is 9.2 times less risky than Nabors Industries. The bond trades about -0.01 of its potential returns per unit of risk. The Nabors Industries is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  7,430  in Nabors Industries on October 9, 2024 and sell it today you would lose (1,020) from holding Nabors Industries or give up 13.73% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.19%
Values	Daily Returns

COCA COLA CO  vs.  Nabors Industries

COCA A CO

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days COCA COLA CO has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 191216CU2 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the 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. 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 February 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with 191216CU2 and Nabors Industries

The main advantage of trading using opposite 191216CU2 and Nabors Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 191216CU2 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 COCA COLA CO 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.