Correlation Between NOV and Now
Can any of the company-specific risk be diversified away by investing in both NOV and Now 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 NOV and Now into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NOV Inc and Now Inc, you can compare the effects of market volatilities on NOV and Now 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 NOV with a short position of Now. Check out your portfolio center. Please also check ongoing floating volatility patterns of NOV and Now.
Diversification Opportunities for NOV and Now
Weak diversification
The 3 months correlation between NOV and Now is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding NOV Inc and Now Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Now Inc and NOV 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 NOV Inc are associated (or correlated) with Now. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Now Inc has no effect on the direction of NOV i.e., NOV and Now go up and down completely randomly.
Pair Corralation between NOV and Now
Considering the 90-day investment horizon NOV is expected to generate 3.94 times less return on investment than Now. But when comparing it to its historical volatility, NOV Inc is 1.38 times less risky than Now. It trades about 0.12 of its potential returns per unit of risk. Now Inc is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest 1,198 in Now Inc on August 28, 2024 and sell it today you would earn a total of 301.00 from holding Now Inc or generate 25.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
NOV Inc vs. Now Inc
Performance |
| Timeline |
| NOV Inc |
| Now Inc |
NOV and Now Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NOV and Now
The main advantage of trading using opposite NOV and Now positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NOV position performs unexpectedly, Now 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 Now will offset losses from the drop in Now's long position.The idea behind NOV Inc and Now 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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