Correlation Between Vanguard World and NOV

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

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

Diversification Opportunities for Vanguard World and NOV

-0.8

Correlation Coefficient

Vanguard World  NOV

Pay attention - limited upside

The 3 months correlation between Vanguard and NOV is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard World and NOV Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NOV Inc and Vanguard World 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 Vanguard World 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 Vanguard World i.e., Vanguard World and NOV go up and down completely randomly.

Pair Corralation between Vanguard World and NOV

Assuming the 90 days trading horizon Vanguard World is expected to generate 0.57 times more return on investment than NOV. However, Vanguard World is 1.74 times less risky than NOV. It trades about 0.04 of its potential returns per unit of risk. NOV Inc is currently generating about 0.0 per unit of risk. If you would invest  453,429  in Vanguard World on October 5, 2024 and sell it today you would earn a total of  72,572  from holding Vanguard World or generate 16.01% return on investment over 90 days.

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

Vanguard World  vs.  NOV Inc

Vanguard World

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard World has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Vanguard World is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

NOV Inc

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NOV Inc are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, NOV is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Vanguard World and NOV

The main advantage of trading using opposite Vanguard World and NOV positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard World 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 Vanguard World 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.

Check out your portfolio center.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.