Correlation Between Noble Plc and Pine Cliff

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

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

Diversification Opportunities for Noble Plc and Pine Cliff

0.54

Correlation Coefficient

Noble Plc  Pine Cliff

Very weak diversification

The 3 months correlation between Noble and Pine is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Noble plc and Pine Cliff Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pine Cliff 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 Pine Cliff. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pine Cliff Energy has no effect on the direction of Noble Plc i.e., Noble Plc and Pine Cliff go up and down completely randomly.

Pair Corralation between Noble Plc and Pine Cliff

Allowing for the 90-day total investment horizon Noble plc is expected to generate 0.94 times more return on investment than Pine Cliff. However, Noble plc is 1.06 times less risky than Pine Cliff. It trades about 0.0 of its potential returns per unit of risk. Pine Cliff Energy is currently generating about -0.02 per unit of risk. If you would invest  3,751  in Noble plc on September 12, 2024 and sell it today you would lose (495.00) from holding Noble plc or give up 13.2% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Noble plc  vs.  Pine Cliff 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 latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pine Cliff Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pine Cliff Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Pine Cliff is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Noble Plc and Pine Cliff

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

The idea behind Noble plc and Pine Cliff 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.