Correlation Between NOV and Halliburton
Can any of the company-specific risk be diversified away by investing in both NOV and Halliburton 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 Halliburton into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NOV Inc and Halliburton, you can compare the effects of market volatilities on NOV and Halliburton 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 Halliburton. Check out your portfolio center. Please also check ongoing floating volatility patterns of NOV and Halliburton.
Diversification Opportunities for NOV and Halliburton
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between NOV and Halliburton is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding NOV Inc and Halliburton in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Halliburton 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 Halliburton. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Halliburton has no effect on the direction of NOV i.e., NOV and Halliburton go up and down completely randomly.
Pair Corralation between NOV and Halliburton
Considering the 90-day investment horizon NOV Inc is expected to generate 1.75 times more return on investment than Halliburton. However, NOV is 1.75 times more volatile than Halliburton. It trades about 0.1 of its potential returns per unit of risk. Halliburton is currently generating about -0.14 per unit of risk. If you would invest 1,462 in NOV Inc on November 9, 2024 and sell it today you would earn a total of 86.00 from holding NOV Inc or generate 5.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
NOV Inc vs. Halliburton
Performance |
| Timeline |
| NOV Inc |
| Halliburton |
NOV and Halliburton Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NOV and Halliburton
The main advantage of trading using opposite NOV and Halliburton positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NOV position performs unexpectedly, Halliburton 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 Halliburton will offset losses from the drop in Halliburton's long position.The idea behind NOV Inc and Halliburton 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.| Halliburton vs. Baker Hughes Co | Halliburton vs. NOV Inc | Halliburton vs. Tenaris SA ADR | Halliburton vs. Weatherford International PLC |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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