Correlation Between Noble Plc and NL Industries
Can any of the company-specific risk be diversified away by investing in both Noble Plc and NL 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 NL 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 NL Industries, you can compare the effects of market volatilities on Noble Plc and NL 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 NL Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Noble Plc and NL Industries.
Diversification Opportunities for Noble Plc and NL Industries
-0.45 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Noble and NL Industries is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Noble plc and NL Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NL Industries 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 NL Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NL Industries has no effect on the direction of Noble Plc i.e., Noble Plc and NL Industries go up and down completely randomly.
Pair Corralation between Noble Plc and NL Industries
Allowing for the 90-day total investment horizon Noble plc is expected to under-perform the NL Industries. But the stock apears to be less risky and, when comparing its historical volatility, Noble plc is 1.3 times less risky than NL Industries. The stock trades about -0.21 of its potential returns per unit of risk. The NL Industries is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 762.00 in NL Industries on September 13, 2024 and sell it today you would earn a total of 17.00 from holding NL Industries or generate 2.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Noble plc vs. NL Industries
Performance |
| Timeline |
| Noble plc |
| NL Industries |
Noble Plc and NL Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Noble Plc and NL Industries
The main advantage of trading using opposite Noble Plc and NL Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Noble Plc position performs unexpectedly, NL 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 NL Industries will offset losses from the drop in NL Industries' long position.| Noble Plc vs. Seadrill Limited | Noble Plc vs. Borr Drilling | Noble Plc vs. Patterson UTI Energy | Noble Plc vs. Transocean |
| NL Industries vs. Brinks Company | NL Industries vs. Allegion PLC | NL Industries vs. Resideo Technologies | NL Industries vs. Mistras Group |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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