Correlation Between Noble Plc and Stepan
Can any of the company-specific risk be diversified away by investing in both Noble Plc and Stepan 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 Stepan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Noble plc and Stepan Company, you can compare the effects of market volatilities on Noble Plc and Stepan 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 Stepan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Noble Plc and Stepan.
Diversification Opportunities for Noble Plc and Stepan
Very weak diversification
The 3 months correlation between Noble and Stepan is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Noble plc and Stepan Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stepan Company 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 Stepan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stepan Company has no effect on the direction of Noble Plc i.e., Noble Plc and Stepan go up and down completely randomly.
Pair Corralation between Noble Plc and Stepan
Allowing for the 90-day total investment horizon Noble plc is expected to under-perform the Stepan. In addition to that, Noble Plc is 1.4 times more volatile than Stepan Company. It trades about -0.03 of its total potential returns per unit of risk. Stepan Company is currently generating about 0.03 per unit of volatility. If you would invest 7,488 in Stepan Company on September 2, 2024 and sell it today you would earn a total of 202.00 from holding Stepan Company or generate 2.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Noble plc vs. Stepan Company
Performance |
| Timeline |
| Noble plc |
| Stepan Company |
Noble Plc and Stepan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Noble Plc and Stepan
The main advantage of trading using opposite Noble Plc and Stepan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Noble Plc position performs unexpectedly, Stepan 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 Stepan will offset losses from the drop in Stepan's long position.| Noble Plc vs. Seadrill Limited | Noble Plc vs. Borr Drilling | Noble Plc vs. Patterson UTI Energy | Noble Plc vs. Transocean |
| Stepan vs. Linde plc Ordinary | Stepan vs. Air Products and | Stepan vs. Aquagold International | Stepan vs. Thrivent High Yield |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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