Correlation Between Northrop Grumman and Nabors Industries

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Can any of the company-specific risk be diversified away by investing in both Northrop Grumman 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 Northrop Grumman and Nabors Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Northrop Grumman Corp and Nabors Industries, you can compare the effects of market volatilities on Northrop Grumman 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 Northrop Grumman with a short position of Nabors Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northrop Grumman and Nabors Industries.

Diversification Opportunities for Northrop Grumman and Nabors Industries

0.22
  Correlation Coefficient

Modest diversification

The 3 months correlation between Northrop and Nabors is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Northrop Grumman Corp and Nabors Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nabors Industries and Northrop Grumman 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 Northrop Grumman Corp 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 Northrop Grumman i.e., Northrop Grumman and Nabors Industries go up and down completely randomly.

Pair Corralation between Northrop Grumman and Nabors Industries

Considering the 90-day investment horizon Northrop Grumman Corp is expected to generate 0.28 times more return on investment than Nabors Industries. However, Northrop Grumman Corp is 3.56 times less risky than Nabors Industries. It trades about -0.07 of its potential returns per unit of risk. Nabors Industries is currently generating about -0.31 per unit of risk. If you would invest  48,581  in Northrop Grumman Corp on June 30, 2022 and sell it today you would lose (1,167)  from holding Northrop Grumman Corp or give up 2.4% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Northrop Grumman Corp  vs.  Nabors Industries

 Performance (%) 
       Timeline  
Northrop Grumman Corp 
Northrop Performance
0 of 100
Over the last 90 days Northrop Grumman Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Northrop Grumman is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Northrop Price Channel

Nabors Industries 
Nabors Performance
0 of 100
Over the last 90 days Nabors Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Even with abnormal performance in the last few months, the Stock's fundamental drivers remain relatively invariable which may send shares a bit higher in October 2022. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Nabors Price Channel

Northrop Grumman and Nabors Industries Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Northrop Grumman and Nabors Industries

The main advantage of trading using opposite Northrop Grumman and Nabors Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northrop Grumman 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.
Northrop Grumman vs. Kibush Capital Corp
The idea behind Northrop Grumman Corp 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.
Nabors Industries vs. Clearwater Paper Corp
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 Piotroski F Score module to get Piotroski F Score based on binary analysis strategy of nine different fundamentals.

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