Correlation Between NOV and Cactus

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

By analyzing existing cross correlation between NOV Inc and Cactus Inc, you can compare the effects of market volatilities on NOV and Cactus 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 Cactus. Check out your portfolio center. Please also check ongoing floating volatility patterns of NOV and Cactus.

Diversification Opportunities for NOV and Cactus

0.41

Correlation Coefficient

NOV  Cactus

Very weak diversification

The 3 months correlation between NOV and Cactus is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding NOV Inc and Cactus Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cactus 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 Cactus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cactus Inc has no effect on the direction of NOV i.e., NOV and Cactus go up and down completely randomly.

Pair Corralation between NOV and Cactus

Considering the 90-day investment horizon NOV Inc is expected to under-perform the Cactus. But the stock apears to be less risky and, when comparing its historical volatility, NOV Inc is 1.16 times less risky than Cactus. The stock trades about -0.28 of its potential returns per unit of risk. The Cactus Inc is currently generating about -0.18 of returns per unit of risk over similar time horizon. If you would invest  6,577  in Cactus Inc on September 18, 2024 and sell it today you would lose (453.50) from holding Cactus Inc or give up 6.9% of portfolio value over 90 days.

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

NOV Inc  vs.  Cactus Inc

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 uncertain 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.

Cactus Inc

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Cactus Inc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical indicators, Cactus is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with NOV and Cactus

The main advantage of trading using opposite NOV and Cactus positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NOV position performs unexpectedly, Cactus 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 Cactus will offset losses from the drop in Cactus' long position.

The idea behind NOV Inc and Cactus 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.

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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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.