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

0.65

Correlation Coefficient

NOV  Halliburton

Poor diversification

The 3 months correlation between NOV and Halliburton is 0.65. 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 under-perform the Halliburton. But the stock apears to be less risky and, when comparing its historical volatility, NOV Inc is 1.03 times less risky than Halliburton. The stock trades about -0.12 of its potential returns per unit of risk. The Halliburton is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  3,882  in Halliburton on January 24, 2024 and sell it today you would lose (10.00) from holding Halliburton or give up 0.26% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

NOV Inc  vs.  Halliburton

NOV Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NOV Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Halliburton

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Halliburton are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Halliburton is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

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.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.