Correlation Between Western Digital and Nabors Industries

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

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

Diversification Opportunities for Western Digital and Nabors Industries

0.35

Correlation Coefficient

Western Digital  Nabors Industries

Weak diversification

The 3 months correlation between Western and Nabors is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Western Digital and Nabors Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nabors Industries and Western Digital 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 Western Digital 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 Western Digital i.e., Western Digital and Nabors Industries go up and down completely randomly.

Pair Corralation between Western Digital and Nabors Industries

Considering the 90-day investment horizon Western Digital is expected to generate 0.37 times more return on investment than Nabors Industries. However, Western Digital is 2.69 times less risky than Nabors Industries. It trades about 0.05 of its potential returns per unit of risk. Nabors Industries is currently generating about -0.04 per unit of risk. If you would invest  3,722  in Western Digital on October 4, 2024 and sell it today you would earn a total of  2,241  from holding Western Digital or generate 60.21% return on investment over 90 days.

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

Western Digital  vs.  Nabors Industries

Western Digital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Western Digital has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

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. Despite conflicting performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Western Digital and Nabors Industries

The main advantage of trading using opposite Western Digital and Nabors Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Digital 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 Western Digital 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.