Correlation Between Noble Plc and High Arctic

Can any of the company-specific risk be diversified away by investing in both Noble Plc and High Arctic 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 High Arctic into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Noble plc and High Arctic Energy, you can compare the effects of market volatilities on Noble Plc and High Arctic 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 High Arctic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Noble Plc and High Arctic.

Diversification Opportunities for Noble Plc and High Arctic

0.3

Correlation Coefficient

Noble Plc  High Arctic

Weak diversification

The 3 months correlation between Noble and High is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Noble plc and High Arctic Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on High Arctic Energy 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 High Arctic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of High Arctic Energy has no effect on the direction of Noble Plc i.e., Noble Plc and High Arctic go up and down completely randomly.

Pair Corralation between Noble Plc and High Arctic

Allowing for the 90-day total investment horizon Noble Plc is expected to generate 266.29 times less return on investment than High Arctic. But when comparing it to its historical volatility, Noble plc is 20.73 times less risky than High Arctic. It trades about 0.01 of its potential returns per unit of risk. High Arctic Energy is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  111.00  in High Arctic Energy on September 4, 2024 and sell it today you would lose (30.00) from holding High Arctic Energy or give up 27.03% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	88.08%
Values	Daily Returns

Noble plc  vs.  High Arctic Energy

Noble plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Noble plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Noble Plc is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

High Arctic Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days High Arctic Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Noble Plc and High Arctic

The main advantage of trading using opposite Noble Plc and High Arctic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Noble Plc position performs unexpectedly, High Arctic 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 High Arctic will offset losses from the drop in High Arctic's long position.

The idea behind Noble plc and High Arctic Energy pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.