Correlation Between PHX Energy and Nabors Industries

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

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

Diversification Opportunities for PHX Energy and Nabors Industries

0.71

Correlation Coefficient

PHX Energy  Nabors Industries

Poor diversification

The 3 months correlation between PHX and Nabors is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding PHX Energy Services and Nabors Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nabors Industries and PHX Energy 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 PHX Energy Services 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 PHX Energy i.e., PHX Energy and Nabors Industries go up and down completely randomly.

Pair Corralation between PHX Energy and Nabors Industries

Assuming the 90 days horizon PHX Energy Services is expected to generate 0.57 times more return on investment than Nabors Industries. However, PHX Energy Services is 1.75 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 0.0 per unit of risk. If you would invest  673.00  in PHX Energy Services on September 17, 2024 and sell it today you would lose (4.00) from holding PHX Energy Services or give up 0.59% of portfolio value over 90 days.

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

PHX Energy Services  vs.  Nabors Industries

PHX Energy Services

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days PHX Energy Services has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical indicators, PHX Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

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 relatively invariable fundamental drivers, Nabors Industries is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with PHX Energy and Nabors Industries

The main advantage of trading using opposite PHX Energy and Nabors Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PHX Energy 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 PHX Energy Services 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.