Correlation Between NORTHERN OCEAN and Nabors Industries
Can any of the company-specific risk be diversified away by investing in both NORTHERN OCEAN 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 NORTHERN OCEAN and Nabors Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NORTHERN OCEAN LTD and Nabors Industries, you can compare the effects of market volatilities on NORTHERN OCEAN 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 NORTHERN OCEAN with a short position of Nabors Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of NORTHERN OCEAN and Nabors Industries.
Diversification Opportunities for NORTHERN OCEAN and Nabors Industries
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between NORTHERN and Nabors is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding NORTHERN OCEAN LTD and Nabors Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nabors Industries and NORTHERN OCEAN 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 NORTHERN OCEAN LTD 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 NORTHERN OCEAN i.e., NORTHERN OCEAN and Nabors Industries go up and down completely randomly.
Pair Corralation between NORTHERN OCEAN and Nabors Industries
Assuming the 90 days horizon NORTHERN OCEAN LTD is expected to generate 2.0 times more return on investment than Nabors Industries. However, NORTHERN OCEAN is 2.0 times more volatile than Nabors Industries. It trades about 0.12 of its potential returns per unit of risk. Nabors Industries is currently generating about 0.04 per unit of risk. If you would invest 59.00 in NORTHERN OCEAN LTD on September 1, 2024 and sell it today you would earn a total of 8.00 from holding NORTHERN OCEAN LTD or generate 13.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NORTHERN OCEAN LTD vs. Nabors Industries
Performance |
| Timeline |
| NORTHERN OCEAN LTD |
| Nabors Industries |
NORTHERN OCEAN and Nabors Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NORTHERN OCEAN and Nabors Industries
The main advantage of trading using opposite NORTHERN OCEAN and Nabors Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NORTHERN OCEAN 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.| NORTHERN OCEAN vs. PARKEN Sport Entertainment | NORTHERN OCEAN vs. MARKET VECTR RETAIL | NORTHERN OCEAN vs. Pick n Pay | NORTHERN OCEAN vs. Iridium Communications |
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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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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