Correlation Between SIMON and Nabors Industries

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

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

Diversification Opportunities for SIMON and Nabors Industries

0.2

Correlation Coefficient

SIMON  Nabors Industries

Modest diversification

The 3 months correlation between SIMON and Nabors is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding SIMON PPTY GROUP and Nabors Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nabors Industries and SIMON 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 SIMON PPTY GROUP 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 SIMON i.e., SIMON and Nabors Industries go up and down completely randomly.

Pair Corralation between SIMON and Nabors Industries

Assuming the 90 days trading horizon SIMON PPTY GROUP is expected to generate 0.15 times more return on investment than Nabors Industries. However, SIMON PPTY GROUP is 6.57 times less risky than Nabors Industries. It trades about -0.15 of its potential returns per unit of risk. Nabors Industries is currently generating about -0.13 per unit of risk. If you would invest  9,905  in SIMON PPTY GROUP on September 17, 2024 and sell it today you would lose (272.00) from holding SIMON PPTY GROUP or give up 2.75% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.35%
Values	Daily Returns

SIMON PPTY GROUP  vs.  Nabors Industries

SIMON PPTY GROUP

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SIMON PPTY GROUP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, SIMON is not utilizing all of its potentials. The latest 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 relatively invariable fundamental drivers, Nabors Industries is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with SIMON and Nabors Industries

The main advantage of trading using opposite SIMON and Nabors Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SIMON 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 SIMON PPTY GROUP 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.