Correlation Between CDW Corp and Nabors Industries

Can any of the company-specific risk be diversified away by investing in both CDW Corp 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 CDW Corp and Nabors Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CDW Corp and Nabors Industries, you can compare the effects of market volatilities on CDW Corp 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 CDW Corp with a short position of Nabors Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of CDW Corp and Nabors Industries.

Diversification Opportunities for CDW Corp and Nabors Industries

-0.04

Correlation Coefficient

CDW Corp  Nabors Industries

Good diversification

The 3 months correlation between CDW and Nabors is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding CDW Corp and Nabors Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nabors Industries and CDW Corp 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 CDW 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 CDW Corp i.e., CDW Corp and Nabors Industries go up and down completely randomly.

Pair Corralation between CDW Corp and Nabors Industries

Considering the 90-day investment horizon CDW Corp is expected to generate 0.57 times more return on investment than Nabors Industries. However, CDW Corp is 1.76 times less risky than Nabors Industries. It trades about 0.01 of its potential returns per unit of risk. Nabors Industries is currently generating about -0.33 per unit of risk. If you would invest  17,745  in CDW Corp on September 19, 2024 and sell it today you would earn a total of  34.00  from holding CDW Corp or generate 0.19% return on investment over 90 days.

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

CDW Corp  vs.  Nabors Industries

CDW Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CDW Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Nabors Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nabors Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's fundamental drivers remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with CDW Corp and Nabors Industries

The main advantage of trading using opposite CDW Corp and Nabors Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CDW Corp 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.

The idea behind CDW 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.

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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 Equity Valuation module to check real value of public entities based on technical and fundamental data.