Correlation Between Noble Plc and TerraVest Industries

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

Diversification Opportunities for Noble Plc and TerraVest Industries

-0.11

Correlation Coefficient

Noble Plc  TerraVest Industries

Good diversification

The 3 months correlation between Noble and TerraVest is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Noble plc and TerraVest Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TerraVest 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 TerraVest Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TerraVest Industries has no effect on the direction of Noble Plc i.e., Noble Plc and TerraVest Industries go up and down completely randomly.

Pair Corralation between Noble Plc and TerraVest Industries

Allowing for the 90-day total investment horizon Noble Plc is expected to generate 12.36 times less return on investment than TerraVest Industries. But when comparing it to its historical volatility, Noble plc is 1.09 times less risky than TerraVest Industries. It trades about 0.01 of its potential returns per unit of risk. TerraVest Industries is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1,752  in TerraVest Industries on September 4, 2024 and sell it today you would earn a total of  6,478  from holding TerraVest Industries or generate 369.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Noble plc  vs.  TerraVest 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 newest stock price tumult, may contribute to shorter-term losses for the shareholders.

TerraVest Industries

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TerraVest Industries are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting basic indicators, TerraVest Industries reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Noble Plc and TerraVest Industries

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

The idea behind Noble plc and TerraVest 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.

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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 Commodity Directory module to find actively traded commodities issued by global exchanges.