Correlation Between Noble Plc and Starbucks
Can any of the company-specific risk be diversified away by investing in both Noble Plc and Starbucks 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 Starbucks into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Noble plc and Starbucks, you can compare the effects of market volatilities on Noble Plc and Starbucks 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 Starbucks. Check out your portfolio center. Please also check ongoing floating volatility patterns of Noble Plc and Starbucks.
Diversification Opportunities for Noble Plc and Starbucks
Very good diversification
The 3 months correlation between Noble and Starbucks is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Noble plc and Starbucks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Starbucks 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 Starbucks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Starbucks has no effect on the direction of Noble Plc i.e., Noble Plc and Starbucks go up and down completely randomly.
Pair Corralation between Noble Plc and Starbucks
Allowing for the 90-day total investment horizon Noble plc is expected to under-perform the Starbucks. But the stock apears to be less risky and, when comparing its historical volatility, Noble plc is 1.08 times less risky than Starbucks. The stock trades about -0.02 of its potential returns per unit of risk. The Starbucks is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 9,399 in Starbucks on September 2, 2024 and sell it today you would earn a total of 847.00 from holding Starbucks or generate 9.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Noble plc vs. Starbucks
Performance |
| Timeline |
| Noble plc |
| Starbucks |
Noble Plc and Starbucks Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Noble Plc and Starbucks
The main advantage of trading using opposite Noble Plc and Starbucks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Noble Plc position performs unexpectedly, Starbucks 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 Starbucks will offset losses from the drop in Starbucks' long position.| Noble Plc vs. Seadrill Limited | Noble Plc vs. Borr Drilling | Noble Plc vs. Patterson UTI Energy | Noble Plc vs. Transocean |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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