Correlation Between Noble Plc and Nabors Industries

Can any of the company-specific risk be diversified away by investing in both Noble Plc and Nabors 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 Nabors 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 Nabors Industries, you can compare the effects of market volatilities on Noble Plc and Nabors 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 Nabors Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Noble Plc and Nabors Industries.

Diversification Opportunities for Noble Plc and Nabors Industries

0.06

Correlation Coefficient

Noble Plc  Nabors Industries

Significant diversification

The 3 months correlation between Noble and Nabors is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Noble plc and Nabors Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nabors 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 Nabors Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nabors Industries has no effect on the direction of Noble Plc i.e., Noble Plc and Nabors Industries go up and down completely randomly.

Pair Corralation between Noble Plc and Nabors Industries

Allowing for the 90-day total investment horizon Noble plc is expected to under-perform the Nabors Industries. But the stock apears to be less risky and, when comparing its historical volatility, Noble plc is 1.65 times less risky than Nabors Industries. The stock trades about -0.06 of its potential returns per unit of risk. The Nabors Industries is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  6,569  in Nabors Industries on September 2, 2024 and sell it today you would earn a total of  774.00  from holding Nabors Industries or generate 11.78% 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.  Nabors Industries

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 latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Nabors Industries

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Nabors Industries are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak fundamental drivers, Nabors Industries may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Noble Plc and Nabors Industries

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

The idea behind Noble plc and Nabors Industries 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.

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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.