Correlation Between Noble Plc and CF Industries
Can any of the company-specific risk be diversified away by investing in both Noble Plc and CF 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 Noble Plc and CF Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Noble plc and CF Industries Holdings, you can compare the effects of market volatilities on Noble Plc and CF 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 Noble Plc with a short position of CF Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Noble Plc and CF Industries.
Diversification Opportunities for Noble Plc and CF Industries
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Noble and CF Industries is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Noble plc and CF Industries Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CF Industries Holdings and Noble Plc 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 Noble plc are associated (or correlated) with CF Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CF Industries Holdings has no effect on the direction of Noble Plc i.e., Noble Plc and CF Industries go up and down completely randomly.
Pair Corralation between Noble Plc and CF Industries
Allowing for the 90-day total investment horizon Noble plc is expected to under-perform the CF Industries. In addition to that, Noble Plc is 1.59 times more volatile than CF Industries Holdings. It trades about -0.01 of its total potential returns per unit of risk. CF Industries Holdings is currently generating about 0.16 per unit of volatility. If you would invest 7,725 in CF Industries Holdings on September 12, 2024 and sell it today you would earn a total of 1,225 from holding CF Industries Holdings or generate 15.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Noble plc vs. CF Industries Holdings
Performance |
| Timeline |
| Noble plc |
| CF Industries Holdings |
Noble Plc and CF Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Noble Plc and CF Industries
The main advantage of trading using opposite Noble Plc and CF Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Noble Plc position performs unexpectedly, CF 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 CF Industries will offset losses from the drop in CF Industries' long position.| Noble Plc vs. Seadrill Limited | Noble Plc vs. Borr Drilling | Noble Plc vs. Patterson UTI Energy | Noble Plc vs. Transocean |
| CF Industries vs. Nutrien | CF Industries vs. Intrepid Potash | CF Industries vs. Corteva | CF Industries vs. ICL Israel Chemicals |
Check out your portfolio center.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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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