Correlation Between NOV and MRC Global

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

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

Diversification Opportunities for NOV and MRC Global

0.26

Correlation Coefficient

NOV  MRC Global

Modest diversification

The 3 months correlation between NOV and MRC is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding NOV Inc and MRC Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MRC Global 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 MRC Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MRC Global has no effect on the direction of NOV i.e., NOV and MRC Global go up and down completely randomly.

Pair Corralation between NOV and MRC Global

Considering the 90-day investment horizon NOV Inc is expected to generate 1.09 times more return on investment than MRC Global. However, NOV is 1.09 times more volatile than MRC Global. It trades about -0.19 of its potential returns per unit of risk. MRC Global is currently generating about -0.32 per unit of risk. If you would invest  2,002  in NOV Inc on February 2, 2024 and sell it today you would lose (143.00) from holding NOV Inc or give up 7.14% of portfolio value over 90 days.

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

NOV Inc  vs.  MRC Global

NOV Inc

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NOV Inc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, NOV may actually be approaching a critical reversion point that can send shares even higher in June 2024.

MRC Global

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in MRC Global are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, MRC Global may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with NOV and MRC Global

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

The idea behind NOV Inc and MRC Global 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 Global Correlations module to find global opportunities by holding instruments from different markets.