Correlation Between Now and Halliburton

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

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

Diversification Opportunities for Now and Halliburton

0.75

Correlation Coefficient

Now  Halliburton

Poor diversification

The 3 months correlation between Now and Halliburton is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Now Inc and Halliburton in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Halliburton and Now 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 Now 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 Now i.e., Now and Halliburton go up and down completely randomly.

Pair Corralation between Now and Halliburton

Given the investment horizon of 90 days Now Inc is expected to generate 0.67 times more return on investment than Halliburton. However, Now Inc is 1.49 times less risky than Halliburton. It trades about 0.02 of its potential returns per unit of risk. Halliburton is currently generating about -0.08 per unit of risk. If you would invest  1,484  in Now Inc on September 12, 2024 and sell it today you would earn a total of  4.00  from holding Now Inc or generate 0.27% return on investment over 90 days.

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

Now Inc  vs.  Halliburton

Now Inc

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Now Inc are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Now showed solid returns over the last few months and may actually be approaching a breakup point.

Halliburton

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Halliburton are ranked lower than 3 (%) 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 latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Now and Halliburton

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

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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.