Correlation between Nabors Industries and crude oil
The correlation coefficient between the price of crude oil and Nabors Industries’ (NBR) stock price from August 19, 2016, to August 18, 2017, is 0.64. This indicates a robust positive relationship between the price of Nabors Industries stock and crude oil.
What does NBR’s correlation with crude oil mean?
Since June 30, 2017, the West Texas Intermediate crude oil price has recovered 5% after it fell significantly over the previous four months. However, analysts do not foresee much of a potential uptick in crude oil’s price in the short run.
A high correlation may be disadvantageous to any impending rise in NBR’s stock price. Nabors Industries’ correlation with crude oil prices has decreased marginally in the trailing year to August 18, 2017, versus the previous year to August 18, 2016.
Correlation between peers’ stock and crude oil
As noted in the graph above, the VanEck Vectors Oil Services ETF’s (OIH) correlation with crude oil since August 19, 2016, is 0.71. Tesco Corporation’s (TESO) correlation coefficient with crude oil since August 19, 2016, is 0.38, while Oceaneering International’s (OII) correlation coefficient with crude oil since August 9, 2016, is 0.58.
McDermott International’s (MDR) correlation coefficient with crude oil during the same period is 0.45. Nabors Industries’ correlation coefficient with the Dow Jones Industrial Average (DJIA-INDEX) since August 19, 2016, is 0.31.
In the final part of this series, we’ll discuss Wall Street’s recommendations for Nabors Industries.