Correlation Between Nabors Industries and Precision Drilling
Can any of the company-specific risk be diversified away by investing in both Nabors Industries and Precision Drilling 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 Nabors Industries and Precision Drilling into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nabors Industries and Precision Drilling, you can compare the effects of market volatilities on Nabors Industries and Precision Drilling 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 Nabors Industries with a short position of Precision Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nabors Industries and Precision Drilling.
Diversification Opportunities for Nabors Industries and Precision Drilling
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Nabors and Precision is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Nabors Industries and Precision Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Precision Drilling and Nabors Industries 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 Nabors Industries are associated (or correlated) with Precision Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Precision Drilling has no effect on the direction of Nabors Industries i.e., Nabors Industries and Precision Drilling go up and down completely randomly.
Pair Corralation between Nabors Industries and Precision Drilling
Considering the 90-day investment horizon Nabors Industries is expected to generate 1.69 times more return on investment than Precision Drilling. However, Nabors Industries is 1.69 times more volatile than Precision Drilling. It trades about 0.02 of its potential returns per unit of risk. Precision Drilling is currently generating about -0.02 per unit of risk. If you would invest 7,650 in Nabors Industries on August 24, 2024 and sell it today you would lose (107.00) from holding Nabors Industries or give up 1.4% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nabors Industries vs. Precision Drilling
Performance |
| Timeline |
| Nabors Industries |
| Precision Drilling |
Nabors Industries and Precision Drilling Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nabors Industries and Precision Drilling
The main advantage of trading using opposite Nabors Industries and Precision Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nabors Industries position performs unexpectedly, Precision Drilling 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 Precision Drilling will offset losses from the drop in Precision Drilling's long position.| Nabors Industries vs. Helmerich and Payne | Nabors Industries vs. Precision Drilling | Nabors Industries vs. Seadrill Limited | Nabors Industries vs. Borr Drilling |
| Precision Drilling vs. Helmerich and Payne | Precision Drilling vs. Nabors Industries | Precision Drilling vs. Seadrill Limited | Precision Drilling vs. Patterson UTI Energy |
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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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